[X]
|
Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
|
|
For
the Fiscal Year Ended December 31,
2008
|
[ ]
|
Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
|
Massachusetts
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20-4652200
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(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
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Identification
No.)
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10 Meridian Street,
East Boston, Massachusetts
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02128
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(Address
of Principal Executive Offices)
|
Zip
Code
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Name
of Each
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|
Title of Each
Class
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Exchange on Which
Registered
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Common
Stock, no par value
|
The
NASDAQ Global Select Stock Market,
LLC
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Page
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3
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4
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24
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29
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29
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29
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29
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30
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34
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35
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56
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57
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103
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103
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103
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104
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104
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104
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104
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104
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105
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106
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·
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statements
of our goals, intentions and
expectations;
|
|
·
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statements
regarding our business plans, prospects, growth and operating
strategies;
|
|
·
|
statements
regarding the quality of our loan and investment portfolios;
and
|
|
·
|
estimates
of our risks and future costs and
benefits.
|
|
·
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general
economic conditions, either nationally or in our market area, that are
worse than expected;
|
|
·
|
inflation
and changes in the interest rate environment that reduce our interest
margins or reduce the fair value of financial
instruments;
|
|
·
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increased
competitive pressures among financial services
companies;
|
|
·
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changes
in consumer spending, borrowing and savings
habits;
|
|
·
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our
ability to enter new markets successfully and take advantage of growth
opportunities, and the possible dilutive effect of potential acquisitions
or de novo
branches, if any;
|
|
·
|
legislative
or regulatory changes that adversely affect our
business;
|
|
·
|
adverse
changes in the securities markets;
|
|
·
|
changes
in accounting policies and practices, as may be adopted by the bank
regulatory agencies, the Financial Accounting Standards Board or the
Securities and Exchange Commission;
|
|
·
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inability
of third-party providers to perform their obligations to us;
and
|
|
·
|
changes
in our organization, compensation and benefit
plans.
|
·
|
Home
Mortgage Disclosure Act of 1975, requiring financial institutions to
provide information to enable the public and public officials to determine
whether a financial institution is fulfilling its obligation to help meet
the housing needs of the community it
serves;
|
·
|
Equal
Credit Opportunity Act, prohibiting discrimination on the basis of race,
creed or other prohibited factors in extending
credit;
|
·
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Fair
Credit Reporting Act of 1978, governing the use and provision of
information to credit reporting
agencies;
|
·
|
Massachusetts
Debt Collection Regulations, establishing standards, by defining unfair or
deceptive acts or practices, for the collection of debts from persons
within the Commonwealth of Massachusetts and the General Laws of
Massachusetts, Chapter 167E, which governs East Boston Savings Bank’s
lending powers; and
|
·
|
Rules
and regulations of the various federal and state agencies charged with the
responsibility of implementing such federal and state
laws.
|
·
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Right
to Financial Privacy Act, which imposes a duty to maintain confidentiality
of consumer financial records and prescribes procedures for complying with
administrative subpoenas of financial
records;
|
·
|
Check
Clearing for the 21st Century Act (also known as “Check 21”), which gives
“substitute checks,” such as digital check images and copies made from
that image, the same legal standing as the original paper check;
and
|
·
|
Electronic
Funds Transfer Act and Regulation E promulgated thereunder, and, as to
East Boston Savings Bank Chapter 167B of the General Laws of
Massachusetts, which govern automatic deposits to and withdrawals from
deposit accounts and customers’ rights and liabilities arising from the
use of automated teller machines and other electronic banking
services;
|
·
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General
Laws of Massachusetts, Chapter 167D, which governs East Boston Savings
Bank’s deposit powers.
|
2008
|
High
|
Low
|
||||||
Fourth
quarter
|
$ | 10.17 | $ | 7.93 | ||||
Third
quarter
|
10.40 | 9.15 | ||||||
Second
quarter
|
10.40 | 9.50 | ||||||
First
quarter
|
9.80 | 8.21 |
Period
|
(a)
|
(b)
|
(c)
|
(d)
|
Total
Number of Shares (or Units) Purchased
|
Average
Price Paid Per Share (or Unit)
|
Total
Number of Shares (or Units) Purchased as Part of Publicly Announced Plans
or Programs (1)
|
Maximum
Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be
Purchased Under the Plans or Programs
|
|
October
1 – 31, 2008
|
-
|
$ -
|
-
|
414,000
|
November
1 – 30, 2008
|
-
|
-
|
-
|
414,000
|
December
1 – 31, 2008
|
250,000
|
$ 9.05
|
250,000
|
164,000
|
Total
|
250,000
|
$ 9.05
|
250,000
|
164,000
|
(1)
|
On
November 28, 2008 the Company announced that its Board of Directors
authorized a stock repurchase program (the “Stock Repurchase Program”) for
the purchase of up to 414,000 shares of the Company’s common stock to fund
restricted share awards under the Company’s 2008 Equity Incentive
Plan. Any purchase of common stock under the Stock Repurchase
Program will be made through open market purchase transactions from time
to time or privately negotiated transactions. The amount and exact timing
of any repurchases will depend on market conditions and other factors, at
the discretion of management of the Company. Repurchased shares will be
held in treasury until used for awards under the Equity Incentive
Plan. As of December 31, 2008, 250,000 shares had been
repurchased at an average price per share of $9.05. The
remaining 164,000 shares had been repurchased as of February 3, 2009, at
an average price per share of
$8.95.
|
Period Ending | ||||||||||||||||||||
Index
|
01/22/08
|
03/31/08
|
06/30/08
|
09/30/08
|
12/31/08
|
|||||||||||||||
Meridian
Interstate Bancorp, Inc. (MHC)
|
$ | 100.00 | $ | 97.70 | $ | 97.20 | $ | 102.10 | $ | 92.50 | ||||||||||
SNL
Bank and Thrift
|
100.00 | 101.27 | 77.44 | 95.85 | 63.90 | |||||||||||||||
NASDAQ
Composite
|
100.00 | 99.43 | 100.03 | 91.26 | 68.80 | |||||||||||||||
Source
: SNL Financial LC, Charlottesville, VA
|
At
or for the Year Ended December 31,
|
||||||||||||||||||||
(Dollars
in thousands)
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||||||||||
Financial
Condition Data
|
||||||||||||||||||||
Total
assets
|
$ | 1,065,352 | $ | 1,003,226 | $ | 899,563 | $ | 824,500 | $ | 794,008 | ||||||||||
Securities
|
252,529 | 267,058 | 281,662 | 264,174 | 298,492 | |||||||||||||||
Loans
receivable, net
|
704,104 | 568,104 | 529,650 | 480,833 | 424,418 | |||||||||||||||
Deposits
|
796,852 | 774,446 | 736,989 | 672,544 | 642,714 | |||||||||||||||
Borrowings
|
65,486 | 36,527 | 40,589 | 37,108 | 38,482 | |||||||||||||||
Total
stockholders' equity
|
189,840 | 115,684 | 110,275 | 104,243 | 102,076 | |||||||||||||||
Operating
Data
|
||||||||||||||||||||
Interest
and dividend income
|
$ | 52,897 | $ | 49,175 | $ | 45,235 | $ | 40,186 | $ | 38,260 | ||||||||||
Interest
expense
|
27,044 | 28,096 | 21,828 | 14,545 | 11,937 | |||||||||||||||
Net
interest income
|
25,853 | 21,079 | 23,407 | 25,641 | 26,323 | |||||||||||||||
Provision
(credit) for loan losses
|
5,638 | 465 | 434 | 456 | (113 | ) | ||||||||||||||
Net
interest income after provision
|
||||||||||||||||||||
for
loan losses
|
20,215 | 20,614 | 22,973 | 25,185 | 26,436 | |||||||||||||||
Non-interest
income
|
8,373 | 4,652 | 3,342 | 3,555 | 4,331 | |||||||||||||||
Non-interest
expenses
|
31,966 | 22,620 | 21,894 | 20,637 | 20,104 | |||||||||||||||
Income
(loss) before income taxes
|
(3,378 | ) | 2,646 | 4,421 | 8,103 | 10,663 | ||||||||||||||
Income
taxes
|
(1,270 | ) | 380 | 1,127 | 2,700 | 3,894 | ||||||||||||||
Net
income (loss)
|
$ | (2,108 | ) | $ | 2,266 | $ | 3,294 | $ | 5,403 | $ | 6,769 | |||||||||
Key
Performance Ratios
|
||||||||||||||||||||
Return
(loss) on average assets
|
(0.20 | ) % | 0.25 | % | 0.38 | % | 0.68 | % | 0.88 | |||||||||||
Return
(loss) on average equity
|
(1.09 | ) | 2.01 | 3.12 | 5.31 | 6.85 | ||||||||||||||
Interest
rate spread (1)
|
2.01 | 1.97 | 2.60 | 3.23 | 3.48 | |||||||||||||||
Net
interest margin (2)
|
2.61 | 2.47 | 2.92 | 3.47 | 3.67 | |||||||||||||||
Non-interest
expense to average assets
|
2.99 | 2.47 | 2.55 | 2.58 | 2.60 | |||||||||||||||
Efficiency
ratio (3)
|
107.29 | 88.94 | 81.72 | 70.97 | 66.75 | |||||||||||||||
Average
interest-earning assets to
|
||||||||||||||||||||
average
interest-bearing liabilities
|
122.16 | 115.31 | 111.47 | 111.97 | 111.68 | |||||||||||||||
Capital
Ratios
|
||||||||||||||||||||
Average
equity to average assets
|
18.17 | % | 12.32 | % | 12.26 | % | 12.72 | % | 12.80 | |||||||||||
Total
capital to risk weighted assets (4)
|
15.26 | 12.97 | 13.44 | 15.49 | 15.05 | |||||||||||||||
Tier
I capital to risk weighted assets (4)
|
14.50 | 11.93 | 12.39 | 14.77 | 14.35 | |||||||||||||||
Tier
I capital to average assets (4)
|
12.82 | 10.21 | 10.46 | 12.77 | 12.53 | |||||||||||||||
Asset
Quality Ratios
|
||||||||||||||||||||
Allowance
for loan losses/total loans
|
0.97 | % | 0.63 | % | 0.63 | % | 0.61 | % | 0.58 | |||||||||||
Allowance
for loan losses/non-performing loans
|
48.57 | 73.00 | 126.06 | 926.50 | 1,301.05 | |||||||||||||||
Net
charge-offs/average loans outstanding
|
0.38 | 0.03 | 0.00 | 0.00 | 0.01 | |||||||||||||||
Non-performing
loans/total loans
|
2.00 | 0.87 | 0.50 | 0.07 | 0.04 | |||||||||||||||
Non-performing
assets/total assets
|
1.58 | 0.55 | 0.30 | 0.04 | 0.02 | |||||||||||||||
Other data: Number of
offices
|
12 | 11 | 11 | 10 | 10 | |||||||||||||||
(1)
Represents the difference between the weighted average yield on average
interest-earning assets and the weighted average
|
||||||||||||||||||||
cost
of interest-bearing liabilities.
|
||||||||||||||||||||
(2)
Represents net interest income as a percent of average interest-earning
assets.
|
||||||||||||||||||||
(3)
Represents non-interest expense divided by the sum of net interest income
and non-interest income, excluding gains
|
||||||||||||||||||||
or losses on the sale of securities.
|
||||||||||||||||||||
(4)
Ratios are for East Boston Savings Bank only.
|
|
1.
|
Managing
credit risk to maintain a low level of nonperforming assets, and interest
rate risk to optimize our net interest
margin;
|
|
2.
|
Expanding
our franchise through the opening of additional branch offices and the
possible acquisition of existing financial service companies or their
assets;
|
|
3.
|
Increasing
core deposits through aggressive marketing and offering new deposit
products; and
|
|
4.
|
Continuing
to grow and diversify our sources of non-interest
income.
|
Loan
Portfolio Composition at December 31,
|
||||||||||||||||||||||||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||||||||||||||||||||||
(Dollars
in thousands)
|
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
||||||||||||||||||||||||||||||
Real
estate loans:
|
||||||||||||||||||||||||||||||||||||||||
One-to
four-family
|
$ | 274,716 | 38.6 | % | $ | 224,109 | 39.1 | % | $ | 204,559 | 38.3 | % | $ | 205,044 | 42.2 | % | $ | 189,586 | 44.2 | |||||||||||||||||||||
Multi-family
|
31,212 | 4.4 | 26,855 | 4.7 | 26,781 | 5.0 | 19,392 | 4.0 | 20,633 | 4.8 | ||||||||||||||||||||||||||||||
Commercial
real estate
|
269,454 | 37.7 | 177,233 | 30.9 | 169,422 | 31.7 | 156,995 | 32.3 | 150,181 | 35.1 | ||||||||||||||||||||||||||||||
Home
equity lines
|
||||||||||||||||||||||||||||||||||||||||
of
credit
|
28,253 | 4.0 | 21,541 | 3.8 | 20,663 | 3.9 | 16,794 | 3.5 | 13,305 | 3.1 | ||||||||||||||||||||||||||||||
Construction
|
91,652 | 12.9 | 109,635 | 19.1 | 101,495 | 19.0 | 76,041 | 15.7 | 44,106 | 10.3 | ||||||||||||||||||||||||||||||
Total
real estate loans
|
695,287 | 97.6 | 559,373 | 97.6 | 522,920 | 97.9 | 474,266 | 97.7 | 417,811 | 97.5 | ||||||||||||||||||||||||||||||
Commercial
business loans
|
15,355 | 2.2 | 11,859 | 2.1 | 10,220 | 1.9 | 10,149 | 2.1 | 9,695 | 2.3 | ||||||||||||||||||||||||||||||
Consumer
loans
|
1,379 | 0.2 | 1,576 | 0.3 | 1,330 | 0.2 | 999 | 0.2 | 1,034 | 0.2 | ||||||||||||||||||||||||||||||
Total
loans
|
712,021 | 100.0 | % | 572,808 | 100.0 | % | 534,470 | 100.0 | % | 485,414 | 100.0 | % | 428,540 | 100.0 | % | |||||||||||||||||||||||||
Net
deferred loan origination fees
|
(1,005 | ) | (1,067 | ) | (1,458 | ) | (1,644 | ) | (1,637 | ) | ||||||||||||||||||||||||||||||
Allowance
for loan losses
|
(6,912 | ) | (3,637 | ) | (3,362 | ) | (2,937 | ) | (2,485 | ) | ||||||||||||||||||||||||||||||
Loans,
net
|
$ | 704,104 | $ | 568,104 | $ | 529,650 | $ | 480,833 | $ | 424,418 |
(In
thousands)
|
Real
Estate
Loans |
Commercial
Business Loans |
Consumer
Loans |
Total Loans |
||||||||||||
Amounts
due in:
|
||||||||||||||||
One
year or less
|
$ | 120,661 | $ | 5,318 | $ | 282 | $ | 126,261 | ||||||||
More
than one to five years
|
354,543 | 8,150 | 1,097 | 363,790 | ||||||||||||
More
than five to ten years
|
81,239 | 92 | - | 81,331 | ||||||||||||
More
than ten years
|
138,844 | 1,795 | - | 140,639 | ||||||||||||
Total
|
$ | 695,287 | $ | 15,355 | $ | 1,379 | $ | 712,021 | ||||||||
Interest
rate terms on amounts
|
||||||||||||||||
due
after one year:
|
||||||||||||||||
Fixed-rate
loans
|
$ | 191,742 | $ | 8,396 | $ | 1,097 | $ | 201,235 | ||||||||
Adjustable-rate
loans
|
382,884 | 1,641 | - | 384,525 | ||||||||||||
Total
|
$ | 574,626 | $ | 10,037 | $ | 1,097 | $ | 585,760 |
At
December 31,
|
||||||||||||||||||||
(Dollars
in thousands)
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||||||||||
Loans
accounted for on a non-accrual basis:
|
||||||||||||||||||||
Real
estate loans:
|
||||||||||||||||||||
One-to
four-family
|
$ | 3,962 | $ | 2,059 | $ | 824 | $ | 167 | $ | 168 | ||||||||||
Multi-family
|
- | - | - | - | - | |||||||||||||||
Commercial
real estate
|
883 | 1,561 | - | 123 | - | |||||||||||||||
Home
equity lines of credit
|
- | 98 | 29 | 27 | 14 | |||||||||||||||
Construction
|
9,387 | 1,218 | 1,814 | - | - | |||||||||||||||
Total
real estate loans
|
14,232 | 4,936 | 2,667 | 317 | 182 | |||||||||||||||
Commercial
business loans
|
- | 45 | - | - | - | |||||||||||||||
Consumer
loans
|
- | 1 | - | - | 8 | |||||||||||||||
Total
non-accrual loans
|
14,232 | 4,982 | 2,667 | 317 | 190 | |||||||||||||||
Accruing
loans past due 90 days or more:
|
||||||||||||||||||||
Real
estate loans
|
- | - | - | - | - | |||||||||||||||
Commercial
business loans
|
- | - | - | - | - | |||||||||||||||
Consumer
loans
|
- | - | - | - | - | |||||||||||||||
Total
accruing past due 90 days or more
|
- | - | - | - | - | |||||||||||||||
Total
non-performing loans
|
14,232 | 4,982 | 2,667 | 317 | 190 | |||||||||||||||
Foreclosed
assets
|
2,604 | 560 | - | - | - | |||||||||||||||
Other
non-performing assets
|
- | - | - | - | - | |||||||||||||||
Total
non-performing assets
|
$ | 16,836 | $ | 5,542 | $ | 2,667 | $ | 317 | $ | 190 | ||||||||||
Restructured
loans
|
$ | 4,273 | $ | - | $ | - | $ | - | $ | - | ||||||||||
Non-performing
loans to total loans
|
2.00 | % | 0.87 | % | 0.50 | % | 0.07 | % | 0.04 | % | ||||||||||
Non-performing
loans to total assets
|
1.34 | % | 0.55 | % | 0.30 | % | 0.04 | % | 0.02 | % |
At
December 31,
|
||||||||||||||||||||||||||||||||||||
2008
|
2007
|
2006
|
||||||||||||||||||||||||||||||||||
30-59
|
60-89
|
90
days
|
30-59
|
60-89
|
90
days
|
30-59
|
60-89
|
90
days
|
||||||||||||||||||||||||||||
|
Days
|
Days
|
or
more
|
Days
|
Days
|
or
more
|
Days
|
Days
|
or
more
|
|||||||||||||||||||||||||||
(In
thousands)
|
Past
Due
|
Past
Due
|
Past
Due
|
Past
Due
|
Past
Due
|
Past
Due
|
Past
Due
|
Past
Due
|
Past
Due
|
|||||||||||||||||||||||||||
Real
estate loans :
|
||||||||||||||||||||||||||||||||||||
One-to
four-family
|
$ | 1,352 | $ | 842 | $ | 1,413 | $ | 1,489 | $ | 856 | $ | 1,036 | $ | 313 | $ | 284 | $ | 540 | ||||||||||||||||||
Multi-family
|
840 | - | 80 | - | - | - | - | - | - | |||||||||||||||||||||||||||
Commercial
real estate
|
1,193 | 348 | 230 | 526 | - | 623 | 992 | - | - | |||||||||||||||||||||||||||
Home
equity lines of credit
|
40 | - | - | 41 | - | 70 | 153 | - | 29 | |||||||||||||||||||||||||||
Construction
|
348 | - | - | 4,576 | - | - | 335 | 760 | 1,054 | |||||||||||||||||||||||||||
Total
real estate loans
|
3,773 | 1,190 | 1,723 | 6,632 | 856 | 1,729 | 1,793 | 1,044 | 1,623 | |||||||||||||||||||||||||||
Commercial
business loans
|
- | - | 25 | 250 | 116 | - | - | |||||||||||||||||||||||||||||
Consumer loans
|
1 | - | 4 | 1 | - | 1 | 3 | 5 | - | |||||||||||||||||||||||||||
Total
|
$ | 3,774 | $ | 1,190 | $ | 1,727 | $ | 6,658 | $ | 856 | $ | 1,980 | $ | 1,912 | $ | 1,049 | $ | 1,623 |
Years
Ended December 31,
|
||||||||||||||||||||
(Dollars
in thousands)
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||||||||||
Beginning
Balance
|
$ | 3,637 | $ | 3,362 | $ | 2,937 | $ | 2,485 | $ | 2,619 | ||||||||||
Provision
(credit) for loan losses
|
5,638 | 465 | 434 | 456 | (113 | ) | ||||||||||||||
Charge
offs:
|
||||||||||||||||||||
Real
estate loans
|
2,265 | 207 | - | - | 12 | |||||||||||||||
Commercial
business loans
|
98 | - | - | - | - | |||||||||||||||
Consumer
loans
|
3 | 63 | 12 | 11 | 18 | |||||||||||||||
Total
charge-offs
|
2,366 | 270 | 12 | 11 | 30 | |||||||||||||||
Recoveries:
|
||||||||||||||||||||
Real
estate loans
|
- | 16 | - | - | - | |||||||||||||||
Commercial
business
|
- | - | - | - | - | |||||||||||||||
Consumer
loans
|
3 | 64 | 3 | 7 | 9 | |||||||||||||||
Total
recoveries
|
3 | 80 | 3 | 7 | 9 | |||||||||||||||
Net
charge-offs
|
(2,363 | ) | (190 | ) | (9 | ) | (4 | ) | (21 | ) | ||||||||||
Allowance
at end of year
|
$ | 6,912 | $ | 3,637 | $ | 3,362 | $ | 2,937 | $ | 2,485 | ||||||||||
Allowance
to nonperforming loans
|
48.57 | % | 73.00 | % | 126.06 | % | 926.50 | % | 1301.05 | % | ||||||||||
Allowance
to total loans outstanding
|
0.97 | % | 0.63 | % | 0.63 | % | 0.61 | % | 0.58 | % | ||||||||||
Net
charge-offs to average
|
0.38 | % | 0.03 | % | 0.00 | % | 0.00 | % | 0.01 | % | ||||||||||
loans
outstanding
|
At
December 31,
|
||||||||||||||||||||||||||||||||||||
2008
|
2007
|
2006
|
||||||||||||||||||||||||||||||||||
(Dollars
in thousands)
|
Amount
|
%
of
Allowance to Total Allowance |
%
of
Loans
in
Category
to
Total
Loans
|
Amount
|
%
of
Allowance to Total Allowance |
%
of
Loans
in
Category
to
Total
Loans
|
Amount
|
%
of
Allowance toTotal Allowance |
%
of
Loans
in
Category
to
Total
Loans
|
|||||||||||||||||||||||||||
Real
estate loans:
|
||||||||||||||||||||||||||||||||||||
One- to four-family
|
$ | 1,481 | 21.4 | % | 38.6 | % | $ | 668 | 18.4 | % | 39.1 | % | $ | 550 | 16.4 | % | 38.3 | % | ||||||||||||||||||
Multi-family
|
259 | 3.8 | 4.4 | 201 | 5.5 | 4.7 | 201 | 6.0 | 5.0 | |||||||||||||||||||||||||||
Commercial real estate
|
2,544 | 36.8 | 37.7 | 1,313 | 36.1 | 30.5 | 1,271 | 37.8 | 31.7 | |||||||||||||||||||||||||||
Home equity lines of credit
|
110 | 1.6 | 4.0 | 82 | 2.2 | 3.8 | 52 | 1.5 | 3.9 | |||||||||||||||||||||||||||
Construction
|
2,019 | 29.2 | 12.9 | 1,007 | 27.7 | 19.5 | 974 | 29.0 | 19.0 | |||||||||||||||||||||||||||
Total real estate loans
|
6,413 | 92.8 | 97.6 | 3,271 | 89.9 | 97.6 | 3,048 | 90.7 | 97.9 | |||||||||||||||||||||||||||
Commercial
business loans
|
490 | 7.1 | 2.2 | 355 | 9.8 | 2.1 | 306 | 9.1 | 1.9 | |||||||||||||||||||||||||||
Consumer loans
|
9 | 0.1 | 0.2 | 11 | 0.3 | 0.3 | 8 | 0.2 | 0.2 | |||||||||||||||||||||||||||
Total
|
$ | 6,912 | 100.0 | % | 100.0 | % | $ | 3,637 | 100.0 | % | 100.0 | % | $ | 3,362 | 100.0 | % | 100.0 | % |
At
December 31,
|
||||||||||||||||||||||||
2008
|
2007
|
2006
|
||||||||||||||||||||||
|
Amortized
|
Fair
|
Amortized
|
Fair
|
Amortized
|
Fair
|
||||||||||||||||||
(In
thousands)
|
Cost
|
Value
|
Cost
|
Value
|
Cost
|
Value
|
||||||||||||||||||
Debt
securities:
|
||||||||||||||||||||||||
Government
– sponsored
|
||||||||||||||||||||||||
enterprises
|
$ | 1,000 | $ | 1,003 | $ | 7,002 | $ | 6,975 | $ | 9,005 | $ | 8,831 | ||||||||||||
Corporate
bonds
|
210,079 | 203,687 | 219,626 | 220,629 | 235,823 | 233,142 | ||||||||||||||||||
Mortgage-backed
securities
|
40 | 40 | 43 | 43 | 46 | 46 | ||||||||||||||||||
Total
debt securities
|
211,119 | 204,730 | 226,671 | 227,647 | 244,874 | 242,019 | ||||||||||||||||||
Marketable
equity securities :
|
||||||||||||||||||||||||
Common
stock
|
26,142 | 22,854 | 27,498 | 38,066 | 27,013 | 36,897 | ||||||||||||||||||
Money
market mutual funds
|
24,945 | 24,945 | 1,345 | 1,345 | 2,746 | 2,746 | ||||||||||||||||||
Total
marketable equity securities
|
51,087 | 47,799 | 28,843 | 39,411 | 29,759 | 39,643 | ||||||||||||||||||
Total
|
$ | 262,206 | $ | 252,529 | $ | 255,514 | $ | 267,058 | $ | 274,633 | $ | 281,662 |
One
Year or Less
|
Total
|
More
than One Year
to Five Years |
More
than Five Years
to Ten Years |
More
than Ten Years
|
||||||||||||||||||||||||||||||||||||
(Dollars
in thousands)
|
Amortized
Cost |
Weighted
Average
Yield
|
Amortized
Cost |
Weighted
Average
Yield
|
Amortize
Cost |
Weighted
Average
Yield
|
Amortized
Cost
|
Weighted
Average
Yield
|
Amortized
Cost |
Weighted
Average
Yield
|
||||||||||||||||||||||||||||||
Government
– sponsored
|
||||||||||||||||||||||||||||||||||||||||
enterprises
|
$ | 1,000 | 3.21 | % | $ | - | - | % | $ | - | - | % | $ | - | - | % | $ | 1,000 | 3.21 | % | ||||||||||||||||||||
Corporate
bonds
|
47,533 | 4.49 | 162,546 | 5.14 | - | - | - | - | 210,079 | 4.99 | ||||||||||||||||||||||||||||||
Mortgage-backed
securities
|
- | - | 1 | 10.72 | 14 | 2.36 | 25 | 8.59 | 40 | 6.46 | ||||||||||||||||||||||||||||||
Total
debt securities
|
$ | 48,533 | 4.46 | % | $ | 162,547 | 5.14 | % | $ | 14 | 2.36 | % | $ | 25 | 8.59 | % | $ | 211,119 | 4.97 | % |
Years
Ended December 31,
|
||||||||||||||||||||||||||||||||||||
2008
|
2007
|
2006
|
||||||||||||||||||||||||||||||||||
(Dollars
in thousands)
|
Average
Balance |
Average
Rate |
Percent
of Total Deposits |
Average
Balance |
Average
Rate |
Percent
of Total Deposits |
Average
Balance |
Average
Rate |
Percent
of Total Deposits |
|||||||||||||||||||||||||||
Demand
deposits
|
$ | 54,503 | - | % | 6.7 | % | $ | 54,051 | - | % | 7.2 | % | $ | 25,358 | - | % | 3.6 | % | ||||||||||||||||||
NOW
deposits
|
39,351 | 0.76 | 4.9 | 34,355 | 0.36 | 4.6 | 67,228 | 0.14 | 9.6 | |||||||||||||||||||||||||||
Money
market deposits
|
149,827 | 2.68 | 18.5 | 113,392 | 3.67 | 15.0 | 105,071 | 3.03 | 14.9 | |||||||||||||||||||||||||||
Regular
and other deposits
|
127,250 | 1.14 | 15.7 | 129,153 | 1.16 | 17.1 | 142,698 | 1.17 | 20.3 | |||||||||||||||||||||||||||
Certificates
of deposit
|
437,183 | 4.41 | 54.2 | 422,588 | 4.84 | 56.1 | 362,990 | 4.15 | 51.6 | |||||||||||||||||||||||||||
Total
|
$ | 808,114 | 3.32 | % | 100.0 | % | $ | 753,539 | 3.75 | % | 100.0 | % | $ | 703,345 | 2.95 | % | 100.0 | % | ||||||||||||||||||
Time
Deposit Maturities of $100,000 or more
|
||||
(In
thousands)
|
Certificates
of
Deposit
|
|||
Maturity
Period:
|
||||
Three
months or less
|
$ | 33,900 | ||
Over
three through six months
|
46,785 | |||
Over
six through twelve months
|
51,201 | |||
Over
twelve months
|
31,807 | |||
Total
|
$ | 163,693 |
Years
Ended
|
||||||||||||||||
December
31,
|
||||||||||||||||
(Dollars
in thousands)
|
2008
|
2007
|
2006
|
2005
|
||||||||||||
Balance
outstanding at end of year
|
$ | 65,486 | $ | 36,527 | $ | 40,589 | $ | 37,108 | ||||||||
Average
amount outstanding during the year
|
$ | 55,882 | $ | 39,193 | $ | 41,039 | $ | 35,665 | ||||||||
Weighted
average interest rate during the year
|
3.59 | % | 4.74 | % | 4.43 | % | 3.76 | % | ||||||||
Maximum
outstanding at any month end
|
$ | 73,227 | $ | 49,188 | $ | 52,649 | $ | 56,030 | ||||||||
Weighted
average interest rate at end of year
|
3.15 | % | 4.49 | % | 4.69 | % | 4.00 | % | ||||||||
At
or For the
|
||||||||||||||||||||||||||||||||||||
Years
Ended December 31,
|
||||||||||||||||||||||||||||||||||||
2008
|
2007
|
2006
|
||||||||||||||||||||||||||||||||||
(Dollars
in thousands)
|
Average
|
Average
|
Average
|
Average
|
Average
|
Average
|
||||||||||||||||||||||||||||||
Balance
|
Interest
|
Yield
|
Balance
|
Interest
|
Yield
|
Balance
|
Interest
|
Yield
|
||||||||||||||||||||||||||||
Assets:
|
||||||||||||||||||||||||||||||||||||
Interest-earning
assets:
|
||||||||||||||||||||||||||||||||||||
Loans
|
$ | 621,985 | $ | 38,781 | 6.24 | % | $ | 550,494 | $ | 35,745 | 6.49 | % | $ | 507,143 | $ | 32,661 | 6.44 | % | ||||||||||||||||||
Securities
|
297,645 | 12,433 | 4.18 | 275,055 | 12,170 | 4.42 | 278,621 | 11,781 | 4.23 | |||||||||||||||||||||||||||
Other
interest-earning assets
|
69,275 | 1,683 | 2.43 | 26,244 | 1,260 | 4.80 | 15,753 | 793 | 5.03 | |||||||||||||||||||||||||||
Total
interest-earning assets
|
988,905 | 52,897 | 5.35 | 851,793 | 49,175 | 5.77 | 801,517 | 45,235 | 5.64 | |||||||||||||||||||||||||||
Noninterest-earning
assets
|
79,250 | 65,348 | 58,643 | |||||||||||||||||||||||||||||||||
Total
assets
|
$ | 1,068,155 | $ | 917,141 | $ | 860,160 | ||||||||||||||||||||||||||||||
Liabilities
and equity:
|
||||||||||||||||||||||||||||||||||||
Interest-bearing
liabilities:
|
||||||||||||||||||||||||||||||||||||
NOW
deposits
|
$ | 39,351 | $ | 301 | 0.76 | $ | 34,355 | $ | 123 | 0.36 | % | $ | 67,228 | $ | 96 | 0.14 | % | |||||||||||||||||||
Money
market deposits
|
149,827 | 4,019 | 2.68 | 113,392 | 4,164 | 3.67 | 105,071 | 3,188 | 3.03 | |||||||||||||||||||||||||||
Regular
and other deposits
|
127,250 | 1,445 | 1.14 | 129,153 | 1,500 | 1.16 | 142,698 | 1,673 | 1.17 | |||||||||||||||||||||||||||
Certificates
of deposit
|
437,183 | 19,275 | 4.41 | 422,588 | 20,452 | 4.84 | 362,990 | 15,052 | 4.15 | |||||||||||||||||||||||||||
Total
interest-bearing deposits
|
753,611 | 25,040 | 3.32 | 699,488 | 26,239 | 3.75 | 677,987 | 20,009 | 2.95 | |||||||||||||||||||||||||||
Borrowings
|
55,882 | 2,004 | 3.59 | 39,193 | 1,857 | 4.74 | 41,039 | 1,819 | 4.43 | |||||||||||||||||||||||||||
Total
interest-bearing liabilities
|
809,493 | 27,044 | 3.34 | 738,681 | 28,096 | 3.80 | 719,026 | 21,828 | 3.04 | |||||||||||||||||||||||||||
Noninterest-bearing
demand deposits
|
54,503 | 54,051 | 25,358 | |||||||||||||||||||||||||||||||||
Other
noninterest-bearing liabilities
|
10,070 | 11,429 | 10,358 | |||||||||||||||||||||||||||||||||
Total
liabilities
|
874,066 | 804,161 | 754,742 | |||||||||||||||||||||||||||||||||
Total
equity
|
194,089 | 112,980 | 105,418 | |||||||||||||||||||||||||||||||||
Total
liabilities and equity
|
$ | 1,068,155 | $ | 917,141 | $ | 860,160 | ||||||||||||||||||||||||||||||
Net
interest income
|
$ | 25,853 | $ | 21,079 | $ | 23,407 | ||||||||||||||||||||||||||||||
Interest
rate spread
|
2.01 | % | 1.97 | % | 2.60 | % | ||||||||||||||||||||||||||||||
Net
interest margin
|
2.61 | % | 2.47 | % | 2.92 | % | ||||||||||||||||||||||||||||||
Average
interest-earning assets to
average
interest-bearing liabilities
|
122.16 | % | 115.31 | % | 111.47 | % | ||||||||||||||||||||||||||||||
|
Rate/Volume
Analysis
|
Years
Ended December 31,
|
Years
Ended December 31,
|
|||||||||||||||||||||||
2008
Compared to 2007
|
2007
Compared to 2006
|
|||||||||||||||||||||||
Increase
(Decrease) Due to
|
Increase
(Decrease) Due to
|
|||||||||||||||||||||||
(In
thousands)
|
Volume
|
Rate
|
Net
|
Volume
|
Rate
|
Net
|
||||||||||||||||||
Interest
income:
|
||||||||||||||||||||||||
Loans
|
$ | 4,398 | $ | (1,362 | ) | $ | 3,036 | $ | 2,670 | $ | 414 | $ | 3,084 | |||||||||||
Securities
|
824 | (561 | ) | 263 | (340 | ) | 729 | 389 | ||||||||||||||||
Other
interest-earning assets
|
605 | (182 | ) | 423 | 502 | (35 | ) | 467 | ||||||||||||||||
Total
|
5,827 | (2,105 | ) | 3,722 | 2,832 | 1,108 | 3,940 | |||||||||||||||||
Interest
expense:
|
||||||||||||||||||||||||
Deposits
|
2,517 | (3,716 | ) | (1,199 | ) | 2,767 | 3,463 | 6,230 | ||||||||||||||||
Borrowings
|
343 | (196 | ) | 147 | (71 | ) | 109 | 38 | ||||||||||||||||
Total
|
2,860 | (3,912 | ) | (1,052 | ) | 2,696 | 3,572 | 6,268 | ||||||||||||||||
Change
in net interest income
|
$ | 2,967 | $ | 1,807 | $ | 4,774 | $ | 136 | $ | (2,464 | ) | $ | (2,328 | ) |
Years
Ended December 31,
|
Change
2008/2007
|
Change
2007/2006
|
||||||||||||||||||||||||||
(In
thousands)
|
2008
|
2007
|
2006
|
Amount
|
Percent
|
Amount
|
Percent
|
|||||||||||||||||||||
Net
interest income
|
$ | 25,853 | $ | 21,079 | $ | 23,407 | $ | 4,774 | 22.65 | % | $ | (2,328 | ) | (9.95 | ) % | |||||||||||||
Provision
for loan losses
|
5,638 | 465 | 434 | 5,173 | 1,112.47 | 31 | 7.14 | |||||||||||||||||||||
Non-interest
income
|
8,373 | 4,652 | 3,342 | 3,721 | 79.99 | 1,310 | 39.20 | |||||||||||||||||||||
Non-interest
expenses
|
31,966 | 22,620 | 21,894 | 9,346 | 41.32 | 726 | 3.32 | |||||||||||||||||||||
Net
income (loss)
|
(2,108 | ) | 2,266 | 3,294 | (4,374 | ) | (193.03 | ) | (1,028 | ) | (31.21 | ) | ||||||||||||||||
Return
(loss) on average equity
|
(1.09 | )% | 2.01 | % | 3.12 | % | (154.23 | ) | (35.58 | ) | ||||||||||||||||||
Return
(loss) on average assets
|
(0.20 | )% | 0.25 | % | 0.38 | % | (180.00 | ) | (34.21 | ) |
Years
Ended December 31,
|
Change
2008/2007
|
Change
2007/2006
|
||||||||||||||||||||||||||
(In
thousands)
|
2008
|
2007
|
2006
|
Amount
|
Percent
|
Amount
|
Percent
|
|||||||||||||||||||||
Customer
service fees
|
$ | 2,796 | $ | 2,733 | $ | 2,378 | $ | 63 | 2.31 | % | $ | 355 | 14.93 | % | ||||||||||||||
Loan
fees
|
673 | 664 | 721 | 9 | 1.36 | (57 | ) | (7.91 | ) | |||||||||||||||||||
Gain
on sales of loans, net
|
39 | 49 | 69 | (10 | ) | (20.41 | ) | (20 | ) | (28.99 | ) | |||||||||||||||||
Gain
(loss) on securities, net
|
4,433 | 299 | (44 | ) | 4,134 | 1,382.61 | 343 | (779.55 | ) | |||||||||||||||||||
Income
from bank-owned life insurance
|
828 | 1,143 | 796 | (315 | ) | (27.56 | ) | 347 | 43.59 | |||||||||||||||||||
Equity
loss on investment in affiliate bank
|
(396 | ) | (541 | ) | (578 | ) | 145 | (26.80 | ) | 37 | (6.40 | ) | ||||||||||||||||
Litigation
settlement
|
- | 305 | - | (305 | ) | (100.00 | ) | 305 | 100.00 | |||||||||||||||||||
Total non-interest
income
|
$ | 8,373 | $ | 4,652 | $ | 3,342 | $ | 3,721 | 79.99 | % | $ | 1,310 | 39.20 | % |
Years
Ended December 31,
|
Change
2008/2007
|
Change
2007/2006
|
||||||||||||||||||||||||||
(In
thousands)
|
2008
|
2007
|
2006
|
Amount
|
Percent
|
Amount
|
Percent
|
|||||||||||||||||||||
Salaries
and employee benefits
|
$ | 17,678 | $ | 14,486 | $ | 13,225 | $ | 3,192 | 22.04 | % | $ | 1,261 | 9.53 | % | ||||||||||||||
Occupancy
and equipment
|
2,915 | 2,602 | 2,630 | 313 | 12.03 | (28 | ) | (1.06 | ) | |||||||||||||||||||
Data
processing
|
1,662 | 1,588 | 1,578 | 74 | 4.66 | 10 | 0.63 | |||||||||||||||||||||
Marketing
and advertising
|
1,214 | 987 | 1,017 | 227 | 23.00 | (30 | ) | (2.95 | ) | |||||||||||||||||||
Professional
services
|
2,300 | 1,069 | 1,036 | 1,231 | 115.15 | 33 | 3.19 | |||||||||||||||||||||
Contribution
to Meridian
|
||||||||||||||||||||||||||||
Charitable
Foundation
|
3,000 | - | - | 3,000 | 100.00 | - | - | |||||||||||||||||||||
Litigation
settlement
|
- | - | 575 | - | - | (575 | ) | (100.00 | ) | |||||||||||||||||||
Other
real estate owned expense
|
675 | 19 | 5 | 656 | 3,452.63 | 14 | 280.00 | |||||||||||||||||||||
Other
general and administrative
|
2,522 | 1,869 | 1,828 | 653 | 34.94 | 41 | 2.24 | |||||||||||||||||||||
Total non-interest
expense
|
$ | 31,966 | $ | 22,620 | $ | 21,894 | $ | 9,346 | 41.32 | % | $ | 726 | 3.32 | % |
|
·
|
Develops,
implements and maintains a risk management program for the entire Bank to
withstand regulatory scrutiny and provides operational safety and
efficiency;
|
|
·
|
Recommends
policy to the Board of Directors;
|
|
·
|
Chairs
the Risk Management Committee;
|
|
·
|
Participates
in developing long-term strategic risk objectives for the
Company;
|
|
·
|
Coordinates
and reviews risk assessments and provides recommendations on risk
controls, testing and mitigation
strategies;
|
|
·
|
Reviews
and provides recommendations and approvals for all proposed business
initiatives;
|
|
·
|
Implements
and maintains the Vendor Management
Program;
|
|
·
|
Acts
as our Information Security Officer and provides comments and
recommendations in accordance with Gramm-Leach Bliley Act requirements;
and
|
|
·
|
Maintains
leading edge knowledge of risk management and regulatory trends and
mitigation strategies.
|
Interest
Rate Sensitivity
|
||||||||||||||||||||||||||
Increase
(Decrease)
|
||||||||||||||||||||||||||
in
Market Interest
|
Net
Interest Income
|
Net
Portfolio Value Estimate
|
||||||||||||||||||||||||
Rates
(Rate Shock)
|
Amount
|
Change
|
Percent
|
Amount
|
Change
|
Percent
|
||||||||||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||||||||||||
200 | $ | 36,782 | $ | 2,252 | 6.52 | % | $ | 134,811 | $ | (57,556 | ) | (29.92 | ) % | |||||||||||||
100 | 35,931 | 1,401 | 4.06 | 165,400 | (26,967 | ) | (14.02 | ) | ||||||||||||||||||
0 | 34,530 | 192,367 | ||||||||||||||||||||||||
(100 | ) | 31,628 | (2,902 | ) | (8.40 | ) | 202,805 | 10,438 | 5.43 | |||||||||||||||||
(200 | ) | 28,014 | (6,516 | ) | (18.87 | ) | 209,967 | 17,600 | 9.15 |
Payments
Due by Period
|
||||||||||||||||||||
(In
thousands)
|
Total
|
Less
than One Year
|
1-3
Years
|
3-5
Years
|
More
Than 5 Years
|
|||||||||||||||
Contractual
obligations:
|
||||||||||||||||||||
Long-term
debt obligations
|
$ | 57,675 | $ | 7,475 | $ | 20,200 | $ | 30,000 | $ | - | ||||||||||
Operating
lease obligations
|
430 | 115 | 232 | 83 | - | |||||||||||||||
Other
long-term obligations (1)
|
6,090 | 1,305 | 2,610 | 2,175 | - | |||||||||||||||
Total
|
$ | 64,195 | $ | 8,895 | $ | 23,042 | $ | 32,258 | $ | - | ||||||||||
(1)
Consists entirely of expenses related to obligations under a data
processing agreement.
|
Page
|
|
Management’s
Annual Report on Internal Control Over Financial Reporting
|
58
|
Report
of Independent Registered Public Accounting Firm
|
59
|
Consolidated
Balance Sheets as of December 31, 2008 and 2007
|
61
|
Consolidated
Statements of Operations for the Years Ended December 31, 2008, 2007 and
2006
|
62
|
Consolidated
Statements of Changes in Stockholders’ Equity for the
Years
|
|
Ended
December 31, 2008, 2007 and 2006
|
63
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and
2006
|
64
|
Notes
to Consolidated Financial Statements
|
66
|
/s/
Richard J. Gavegnano
|
|
Richard
J. Gavegnano
|
|
Chairman
of the Board and Chief Executive Officer
|
|
/s/
Leonard V. Siuda
|
|
Leonard
V. Siuda
|
|
Chief
Financial Officer and Treasurer
|
|
(Principal
Financial and Accounting Officer)
|
|
MERIDIAN
INTERSTATE BANCORP, INC. AND SUBSIDIARIES
|
||||||||
CONSOLIDATED
BALANCE SHEETS
|
||||||||
December
31,
|
||||||||
(Dollars
in thousands)
|
2008
|
2007
|
||||||
ASSETS
|
||||||||
Cash
and due from banks
|
$ | 10,354 | $ | 11,821 | ||||
Federal
funds sold
|
9,911 | 91,272 | ||||||
Total
cash and cash equivalents
|
20,265 | 103,093 | ||||||
Certificates
of deposit - affiliate bank
|
7,000 | - | ||||||
Securities
available for sale, at fair value
|
252,529 | 267,058 | ||||||
Federal
Home Loan Bank stock, at cost
|
4,303 | 3,165 | ||||||
Loans
|
711,016 | 571,741 | ||||||
Less
allowance for loan losses
|
(6,912 | ) | (3,637 | ) | ||||
Loans,
net
|
704,104 | 568,104 | ||||||
Bank-owned
life insurance
|
22,831 | 18,003 | ||||||
Foreclosed
real estate, net
|
2,604 | 560 | ||||||
Investment
in affiliate bank
|
10,376 | 10,772 | ||||||
Premises
and equipment, net
|
22,710 | 22,816 | ||||||
Accrued
interest receivable
|
6,036 | 5,764 | ||||||
Deferred
tax asset, net
|
10,057 | - | ||||||
Other
assets
|
2,537 | 3,891 | ||||||
Total
assets
|
$ | 1,065,352 | $ | 1,003,226 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Deposits:
|
||||||||
Non
interest-bearing
|
$ | 55,216 | $ | 51,396 | ||||
Interest-bearing
|
741,636 | 723,050 | ||||||
Total
deposits
|
796,852 | 774,446 | ||||||
Stock
subscriptions
|
- | 62,518 | ||||||
Short-term
borrowings - affiliate bank
|
7,811 | - | ||||||
Short-term
borrowings - other
|
- | 9,154 | ||||||
Long-term
debt
|
57,675 | 27,373 | ||||||
Accrued
expenses and other liabilities
|
13,174 | 14,051 | ||||||
Total
liabilities
|
875,512 | 887,542 | ||||||
Commitments
and contingencies (Notes 6, 8 and 12)
|
||||||||
Stockholders'
equity:
|
||||||||
Common
stock, no par value 50,000,000 shares
|
||||||||
authorized;
23,000,000 and 0 shares issued
|
||||||||
at
December 31, 2008 and December 31, 2007
|
- | - | ||||||
Additional
paid-in capital
|
100,684 | - | ||||||
Retained
earnings
|
105,426 | 109,177 | ||||||
Accumulated
other comprehensive income (loss)
|
(6,205 | ) | 6,507 | |||||
Unearned
compensation - ESOP, 786,600 shares and 0
|
||||||||
shares
at December 31, 2008 and 2007, respectively
|
(7,866 | ) | - | |||||
Unearned
compensation - restricted shares, 250,000 and 0
|
||||||||
shares
at December 31, 2008 and 2007, respectively
|
(2,199 | ) | - | |||||
Total
stockholders' equity
|
189,840 | 115,684 | ||||||
Total
liabilities and stockholders' equity
|
$ | 1,065,352 | $ | 1,003,226 |
Years Ended
December 31,
|
||||||||||||
(In
thousands)
|
2008
|
2007
|
2006
|
|||||||||
Interest
and dividend income:
|
||||||||||||
Interest
and fees on loans
|
$ | 38,781 | $ | 35,745 | $ | 32,661 | ||||||
Interest
on debt securities
|
10,460 | 11,039 | 10,577 | |||||||||
Dividends
on equity securities
|
1,816 | 1,131 | 1,204 | |||||||||
Interest
on certificates of deposit
|
157 | - | - | |||||||||
Interest
on federal funds sold
|
1,683 | 1,260 | 793 | |||||||||
Total
interest and dividend income
|
52,897 | 49,175 | 45,235 | |||||||||
Interest
expense:
|
||||||||||||
Interest
on deposits
|
25,040 | 26,239 | 20,009 | |||||||||
Interest
on short-term borrowings
|
132 | 370 | 392 | |||||||||
Interest
on long-term debt
|
1,872 | 1,487 | 1,427 | |||||||||
Total
interest expense
|
27,044 | 28,096 | 21,828 | |||||||||
Net
interest income
|
25,853 | 21,079 | 23,407 | |||||||||
Provision
for loan losses
|
5,638 | 465 | 434 | |||||||||
Net
interest income, after provision
|
||||||||||||
for
loan losses
|
20,215 | 20,614 | 22,973 | |||||||||
Non-interest
income:
|
||||||||||||
Customer
service fees
|
2,796 | 2,733 | 2,378 | |||||||||
Loan
fees
|
673 | 664 | 721 | |||||||||
Gain
on sales of loans, net
|
39 | 49 | 69 | |||||||||
Gain
(loss) on sales of securities, net
|
4,433 | 299 | (44 | ) | ||||||||
Income
from bank-owned life insurance
|
828 | 1,143 | 796 | |||||||||
Equity
loss on investment in affiliate bank
|
(396 | ) | (541 | ) | (578 | ) | ||||||
Litigation
settlement
|
- | 305 | - | |||||||||
Total
non-interest income
|
8,373 | 4,652 | 3,342 | |||||||||
Non-interest
expenses:
|
||||||||||||
Salaries
and employee benefits
|
17,678 | 14,486 | 13,225 | |||||||||
Occupancy
and equipment
|
2,915 | 2,602 | 2,630 | |||||||||
Data
processing
|
1,662 | 1,588 | 1,578 | |||||||||
Marketing
and advertising
|
1,214 | 987 | 1,017 | |||||||||
Professional
services
|
2,300 | 1,069 | 1,036 | |||||||||
Contribution
to Meridian
|
||||||||||||
Charitable
Foundation
|
3,000 | - | - | |||||||||
Litigation
settlement
|
- | - | 575 | |||||||||
Foreclosed
real estate expense
|
675 | 19 | 5 | |||||||||
Other
general and administrative
|
2,522 | 1,869 | 1,828 | |||||||||
Total
non-interest expenses
|
31,966 | 22,620 | 21,894 | |||||||||
Income
(loss) before income taxes
|
(3,378 | ) | 2,646 | 4,421 | ||||||||
Provision
(benefit) for income taxes
|
(1,270 | ) | 380 | 1,127 | ||||||||
Net
income (loss)
|
$ | (2,108 | ) | $ | 2,266 | $ | 3,294 | |||||
Loss
per share- basic
|
N/A | N/A | N/A | |||||||||
Loss
per share - diluted
|
N/A | N/A | N/A | |||||||||
Weighted
average shares - basic
|
N/A | N/A | N/A | |||||||||
Weighted
average shares - diluted
|
N/A | N/A | N/A |
MERIDIAN
INTERSTATE BANCORP, INC. AND SUBSIDIARIES
|
||||||||||||||||||||||||||||||||
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
|
||||||||||||||||||||||||||||||||
Years
Ended December 31, 2008, 2007 and 2006
|
||||||||||||||||||||||||||||||||
(Dollars
in thousands)
|
Shares
of Common Stock
|
Common
Stock
|
Additional
Paid-in Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income (Loss) |
Unearned
Compensation
ESOP |
Unearned
Compensation
Restricted Shares |
Total
|
||||||||||||||||||||||||
Balance
at December 31, 2005
|
- | $ | - | $ | - | $ | 103,617 | $ | 626 | $ | - | - | $ | 104,243 | ||||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||||||||||
Net
income
|
- | - | - | 3,294 | - | - | - | 3,294 | ||||||||||||||||||||||||
Change
in net unrealized gain on securities available for
|
||||||||||||||||||||||||||||||||
sale,
net of reclassification adjustment and tax effects
|
- | - | - | - | 3,323 | - | - | 3,323 | ||||||||||||||||||||||||
Total
comprehensive income
|
6,617 | |||||||||||||||||||||||||||||||
Adjustment
to initially apply SFAS No. 158,
|
||||||||||||||||||||||||||||||||
net
of tax effects
|
- | - | - | - | (585 | ) | - | - | (585 | ) | ||||||||||||||||||||||
Balance
at December 31, 2006
|
- | - | - | 106,911 | 3,364 | - | - | 110,275 | ||||||||||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||||||||||
Net
income
|
- | - | - | 2,266 | - | - | - | 2,266 | ||||||||||||||||||||||||
Change
in net unrealized gain on securities available for
|
||||||||||||||||||||||||||||||||
sale,
net of reclassification adjustment and tax effects
|
- | - | - | - | 2,720 | - | - | 2,720 | ||||||||||||||||||||||||
Change
in prior service costs and
|
||||||||||||||||||||||||||||||||
actuarial
losses, net of tax effects
|
- | - | - | - | 94 | - | - | 94 | ||||||||||||||||||||||||
Termination
of supplemental executive
|
||||||||||||||||||||||||||||||||
retirement
plan, net of tax effects (Note 13)
|
- | - | - | - | 329 | - | - | 329 | ||||||||||||||||||||||||
Total
comprehensive income
|
5,409 | |||||||||||||||||||||||||||||||
Balance
at December 31, 2007
|
- | - | - | 109,177 | 6,507 | - | - | 115,684 | ||||||||||||||||||||||||
Adjustment
to initially apply EITF 06-4
|
- | - | - | (1,643 | ) | - | - | (1,643 | ) | |||||||||||||||||||||||
Comprehensive
loss:
|
||||||||||||||||||||||||||||||||
Net
loss
|
- | - | - | (2,108 | ) | - | - | - | (2,108 | ) | ||||||||||||||||||||||
Change
in net unrealized gain/loss on securities available for
|
||||||||||||||||||||||||||||||||
sale,
net of reclassification adjustment and tax effects
|
- | - | - | - | (12,384 | ) | - | - | (12,384 | ) | ||||||||||||||||||||||
Change
in prior service costs and
|
||||||||||||||||||||||||||||||||
actuarial
losses, net of tax effects
|
- | - | - | - | 25 | - | - | 25 | ||||||||||||||||||||||||
Total
comprehensive loss
|
(14,467 | ) | ||||||||||||||||||||||||||||||
Adjustment
to initially apply SFAS No. 158 for
|
||||||||||||||||||||||||||||||||
long-term
health care plan, net of tax effects
|
- | - | - | - | (353 | ) | - | - | (353 | ) | ||||||||||||||||||||||
Issuance
of 12,650,000 shares to the mutual
|
||||||||||||||||||||||||||||||||
holding
company
|
12,650,000 | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Issuance
of 10,050,000 shares in the initial
|
||||||||||||||||||||||||||||||||
public
offering, net of expenses of $2,867
|
10,050,000 | - | 97,633 | - | - | - | - | 97,633 | ||||||||||||||||||||||||
Issuance
and contribution of 300,000 shares
|
||||||||||||||||||||||||||||||||
to
the Meridian Charitable Foundation
|
300,000 | - | 3,000 | - | - | - | - | 3,000 | ||||||||||||||||||||||||
Purchase
of common stock by the ESOP
|
- | - | - | - | - | (8,280 | ) | - | (8,280 | ) | ||||||||||||||||||||||
ESOP
shares earned (41,400 shares)
|
- | - | (14 | ) | - | - | 414 | - | 400 | |||||||||||||||||||||||
Purchase
of 250,000 shares
|
||||||||||||||||||||||||||||||||
for
restricted share plan
|
- | - | - | - | - | - | (2,262 | ) | (2,262 | ) | ||||||||||||||||||||||
Share-based
compensation expense
|
- | 65 | - | - | - | 63 | 128 | |||||||||||||||||||||||||
Balance
at December 31, 2008
|
23,000,000 | $ | - | $ | 100,684 | $ | 105,426 | $ | (6,205 | ) | $ | (7,866 | ) | $ | (2,199 | ) | $ | 189,840 |
Years Ended
December 31,
|
||||||||||||
(In
thousands)
|
2008
|
2007
|
2006
|
|||||||||
Change
flows from operating activities:
|
||||||||||||
Net
income (loss)
|
$ | (2,108 | ) | $ | 2,266 | $ | 3,294 | |||||
Adjustments
to reconcile net income (loss) to net cash
|
||||||||||||
provided
by operating activities:
|
||||||||||||
Provision
for loan losses
|
5,638 | 465 | 434 | |||||||||
Earned
ESOP shares
|
400 | - | - | |||||||||
Contribution
of stock to charitable foundation
|
3,000 | - | - | |||||||||
Amortization
of net deferred loan origination fees
|
(286 | ) | (464 | ) | (608 | ) | ||||||
Gain
on sale of loans held in portfolio
|
- | - | (14 | ) | ||||||||
Net
amortization of securities available for sale
|
1,118 | 649 | 1,017 | |||||||||
Depreciation
and amortization expense
|
1,270 | 1,200 | 1,178 | |||||||||
Loss
(gain) on securities, net
|
(4,433 | ) | (299 | ) | 44 | |||||||
Provision
for foreclosed real estate
|
475 | - | - | |||||||||
Loss
on sales of foreclosed real estate
|
5 | - | - | |||||||||
Deferred
income tax benefit
|
(2,463 | ) | (316 | ) | (390 | ) | ||||||
Income
from bank-owned life insurance
|
(828 | ) | (1,143 | ) | (796 | ) | ||||||
Equity
loss on investment in affiliate bank
|
396 | 541 | 578 | |||||||||
Share-based
compensation expense
|
128 | - | - | |||||||||
Net
changes in:
|
||||||||||||
Loans
held for sale
|
- | 745 | - | |||||||||
Accrued
interest receivable
|
(272 | ) | (262 | ) | (832 | ) | ||||||
Other
assets
|
1,354 | (2,005 | ) | (780 | ) | |||||||
Accrued
expenses and other liabilities
|
(1,605 | ) | 1,647 | 113 | ||||||||
Net
cash provided by operating activities
|
1,789 | 3,024 | 3,238 | |||||||||
Cash
flows from investing activities:
|
||||||||||||
Purchase
of certificates of deposit
|
(7,000 | ) | - | - | ||||||||
Activity
in securities available for sale:
|
||||||||||||
Proceeds
from maturities, calls and principal payments
|
121,131 | 97,441 | 91,909 | |||||||||
Proceeds
from redemption of mutual funds
|
57,000 | - | - | |||||||||
Proceeds
from sales
|
18,359 | 44,091 | 14,975 | |||||||||
Purchases
|
(199,867 | ) | (122,763 | ) | (119,748 | ) | ||||||
Investment
in affiliate bank
|
- | - | (11,400 | ) | ||||||||
Redemption
(purchase) of Federal Home Loan Bank stock
|
(1,138 | ) | 206 | 99 | ||||||||
Loans
originated, net of principal payments received
|
(145,280 | ) | (36,386 | ) | (55,540 | ) | ||||||
Purchase
of bank-owned life insurance
|
(4,000 | ) | - | - | ||||||||
Proceeds
from sales of loans held in portfolio
|
- | - | 3,317 | |||||||||
Decrease
in cash surrender value from life insurance proceeds
|
- | 2,169 | - | |||||||||
Purchases
of premises and equipment
|
(1,164 | ) | (4,316 | ) | (2,949 | ) | ||||||
Proceeds
from sales of foreclosed real estate
|
1,463 | 220 | - | |||||||||
Capitalized
costs on foreclosed real estate
|
(59 | ) | - | - | ||||||||
Net
cash used in investing activities
|
(160,555 | ) | (19,338 | ) | (79,337 | ) | ||||||
Years Ended
December 31,
|
||||||||||||
(In
thousands)
|
2008
|
2007
|
2006
|
|||||||||
Cash
flows from financing activities:
|
||||||||||||
Net
increase in deposits
|
22,406 | 37,457 | 64,445 | |||||||||
Net
change in stock subscriptions
|
(62,518 | ) | 62,518 | - | ||||||||
Proceeds
from sale of common stock
|
97,633 | - | - | |||||||||
Common
stock purchased by ESOP
|
(8,280 | ) | - | - | ||||||||
Purchase
of stock for equity incentive plan
|
(2,262 | ) | - | - | ||||||||
Net
change in borrowings with maturities
|
||||||||||||
less
than three months
|
(1,343 | ) | (212 | ) | 1,983 | |||||||
Proceeds
from Federal Home Loan Bank advances
|
||||||||||||
with
maturities of three months or more
|
45,150 | 150 | 14,013 | |||||||||
Repayment
of Federal Home Loan Bank advances
|
||||||||||||
with
maturities of three months or more
|
(14,848 | ) | (4,000 | ) | (12,515 | ) | ||||||
Net
cash provided by financing activities
|
75,938 | 95,913 | 67,926 | |||||||||
Net
change in cash and cash equivalents
|
(82,828 | ) | 79,599 | (8,173 | ) | |||||||
Cash
and cash equivalents at beginning of year
|
103,093 | 23,494 | 31,667 | |||||||||
Cash
and cash equivalents at end of year
|
$ | 20,265 | $ | 103,093 | $ | 23,494 | ||||||
Supplemental
cash flow information:
|
||||||||||||
Interest
paid on deposits
|
$ | 25,237 | $ | 26,171 | $ | 19,631 | ||||||
Interest
paid on borrowed funds
|
1,948 | 1,872 | 1,798 | |||||||||
Income
taxes paid, net of refunds
|
647 | 455 | 2,497 | |||||||||
Non-cash
investing and financing activities:
|
||||||||||||
Transfers
from loans to loans held for sale
|
- | - | 3,594 | |||||||||
Transfers
from loans held for sale to loans
|
- | 2,849 | - | |||||||||
Transfers
from loans to foreclosed real estate
|
3,928 | 780 | - |
Years
Ended December 31,
|
||||||||||||
(In
thousands)
|
2008
|
2007
|
2006
|
|||||||||
Unrealized
holding gains (losses) on
|
||||||||||||
securities
available for sale
|
$ | (16,788 | ) | $ | 4,814 | $ | 5,641 | |||||
Reclassification
adjustments for losses (gains)
|
||||||||||||
realized
in income
|
(4,433 | ) | (299 | ) | 44 | |||||||
Unrealized
gains (losses)
|
(21,221 | ) | 4,515 | 5,685 | ||||||||
Tax
effect
|
8,837 | (1,795 | ) | (2,362 | ) | |||||||
Net-of-tax
amount
|
(12,384 | ) | 2,720 | 3,323 | ||||||||
Amortization
of net actuarial loss and prior
|
||||||||||||
service
cost - supplemental director retirement plan
|
27 | 159 | - | |||||||||
Tax
effect
|
(11 | ) | (65 | ) | - | |||||||
Net-of-tax
amount
|
16 | 94 | - | |||||||||
Amortization
of net actuarial loss and prior
|
||||||||||||
service
cost - long-term health care plan
|
18 | - | - | |||||||||
Tax
effect
|
(9 | ) | - | - | ||||||||
Net-of-tax
amount
|
9 | - | - | |||||||||
Termination
of supplemental executive
|
||||||||||||
retirement
plan
|
- | 557 | - | |||||||||
Tax
effect
|
- | (228 | ) | - | ||||||||
Net-of-tax
amount
|
- | 329 | - | |||||||||
$ | (12,359 | ) | $ | 3,143 | $ | 3,323 | ||||||
December
31,
|
||||||||
(In
thousands)
|
2008
|
2007
|
||||||
Net
unrealized gain (loss) on securities
|
||||||||
available
for sale
|
$ | (9,677 | ) | $ | 11,544 | |||
Tax
effect
|
3,962 | (4,875 | ) | |||||
Net-of-tax
amount
|
(5,715 | ) | 6,669 | |||||
Unrecognized
net actuarial loss pertaining
|
||||||||
to
supplemental executive retirement plans
|
(40 | ) | (47 | ) | ||||
Unrecognized
prior service cost pertaining
|
||||||||
to
supplemental executive retirement plans
|
(209 | ) | (229 | ) | ||||
Total
|
(249 | ) | (276 | ) | ||||
Tax
effect
|
103 | 114 | ||||||
Net-of-tax
amount
|
(146 | ) | (162 | ) | ||||
Unrecognized
prior service cost pertaining
|
||||||||
to
long-term health care plan
|
(522 | ) | - | |||||
Tax
effect
|
178 | - | ||||||
Net-of-tax
amount
|
(344 | ) | - | |||||
$ | (6,205 | ) | $ | 6,507 | ||||
On
July 2, 2007, the Board of Directors of the Company and the Board of
Directors of the Bank unanimously adopted the Plan of Stock Issuance (the
“Plan”) pursuant to which the Company sold common stock representing a
minority ownership of the estimated pro forma market value of the Company,
as determined by an independent appraisal, to eligible depositors of the
Bank and the Company’s qualified employee benefit plans in a stock
subscription offering and to the general public in a syndicated community
offering. The majority of the common stock is owned by the
Company’s parent company, Meridian Financial Services, Incorporated (a
mutual holding company).
|
Part
of the offering included the establishment of an employee stock ownership
plan (“the ESOP”) which acquired 828,000 shares of stock in the
offering. The ESOP borrowed the funds to acquire these shares
from the net offering proceeds retained by Meridian Interstate
Bancorp. The borrowing has an interest rate of 6.5% and a term
of 20 years. East Boston Savings Bank intends to make
contributions to the employee stock ownership plan in amounts at least
equal to the principal and interest requirement of the debt. As
the debt is paid down, shares will be released for allocation to
participants’ accounts and stockholders’ equity will be
increased. The amount of this borrowing has been reflected as a
reduction from gross proceeds to determine estimated net investable
proceeds.
|
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
(In
thousands)
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||
December 31, 2008
|
||||||||||||||||
Debt
securities:
|
||||||||||||||||
Government-sponsored
enterprises
|
$ | 1,000 | $ | 3 | $ | - | $ | 1,003 | ||||||||
Corporate
bonds
|
210,079 | 1,404 | (7,796 | ) | 203,687 | |||||||||||
Mortgage-backed
securities
|
40 | 3 | (3 | ) | 40 | |||||||||||
Total
debt securities
|
211,119 | 1,410 | (7,799 | ) | 204,730 | |||||||||||
Marketable
equity securities:
|
||||||||||||||||
Common
stocks
|
26,142 | 1,185 | (4,473 | ) | 22,854 | |||||||||||
Money
market mutual funds
|
24,945 | - | - | 24,945 | ||||||||||||
Total
marketable equity securities
|
51,087 | 1,185 | (4,473 | ) | 47,799 | |||||||||||
Total
securities available
|
||||||||||||||||
for
sale
|
$ | 262,206 | $ | 2,595 | $ | (12,272 | ) | $ | 252,529 | |||||||
December 31, 2007
|
||||||||||||||||
Debt
securities:
|
||||||||||||||||
Government-sponsored
enterprises
|
$ | 7,002 | $ | - | $ | (27 | ) | $ | 6,975 | |||||||
Corporate
bonds
|
219,626 | 1,697 | (694 | ) | 220,629 | |||||||||||
Mortgage-backed
securities
|
43 | 3 | (3 | ) | 43 | |||||||||||
Total
debt securities
|
226,671 | 1,700 | (724 | ) | 227,647 | |||||||||||
Marketable
equity securities:
|
||||||||||||||||
Common
stocks
|
27,498 | 10,819 | (251 | ) | 38,066 | |||||||||||
Money
market mutual funds
|
1,345 | - | - | 1,345 | ||||||||||||
Total
marketable equity securities
|
28,843 | 10,819 | (251 | ) | 39,411 | |||||||||||
Total
securities available
|
||||||||||||||||
for
sale
|
$ | 255,514 | $ | 12,519 | $ | (975 | ) | $ | 267,058 |
December
31, 2008
|
December
31, 2007
|
|||||||||||||||
Amortized
|
Fair
|
Amortized
|
Fair
|
|||||||||||||
(In
thousands)
|
Cost
|
Value
|
Cost
|
Value
|
||||||||||||
Within
1 year
|
$ | 48,533 | $ | 48,430 | $ | 77,870 | $ | 77,669 | ||||||||
Over
1 year to 5 years
|
162,546 | 156,260 | 148,758 | 149,935 | ||||||||||||
Mortgage-backed
securities
|
40 | 40 | 43 | 43 | ||||||||||||
$ | 211,119 | $ | 204,730 | $ | 226,671 | $ | 227,647 |
Less
Than Twelve Months
|
Over
Twelve Months
|
|||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Unrealized
|
Fair
|
Unrealized
|
Fair
|
|||||||||||||
(In
thousands)
|
Losses
|
Value
|
Losses
|
Value
|
||||||||||||
December 31, 2008
|
||||||||||||||||
Debt
securities:
|
||||||||||||||||
Corporate
bonds
|
$ | 4,431 | $ | 77,145 | $ | 3,365 | $ | 36,102 | ||||||||
Mortgage-backed
securities
|
- | - | 3 | 11 | ||||||||||||
Total
debt securities
|
4,431 | 77,145 | 3,368 | 36,113 | ||||||||||||
Common
stock
|
3,728 | 14,979 | 745 | 2,281 | ||||||||||||
Total
temporarily impaired
|
||||||||||||||||
securities
|
$ | 8,159 | $ | 92,124 | $ | 4,113 | $ | 38,394 |
Less
Than Twelve Months
|
Over
Twelve Months
|
|||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Unrealized
|
Fair
|
Unrealized
|
Fair
|
|||||||||||||
(In
thousands)
|
Losses
|
Value
|
Losses
|
Value
|
||||||||||||
December 31, 2007
|
||||||||||||||||
Debt
securities:
|
||||||||||||||||
Government-sponsored
enterprises
|
$ | - | $ | - | $ | 27 | $ | 6,975 | ||||||||
Corporate
bonds
|
160 | 30,256 | 534 | 77,576 | ||||||||||||
Mortgage-backed
securities
|
- | - | 3 | 12 | ||||||||||||
Total
debt securities
|
160 | 30,256 | 564 | 84,563 | ||||||||||||
Common
stock
|
221 | 3,931 | 30 | 285 | ||||||||||||
Total
temporarily impaired
|
||||||||||||||||
securities
|
$ | 381 | $ | 34,187 | $ | 594 | $ | 84,848 |
December
31,
|
||||||||
(In
thousands)
|
2008
|
2007
|
||||||
Mortgage
loans on real estate:
|
||||||||
Residential
real estate
|
$ | 274,716 | $ | 224,109 | ||||
Commercial
real estate
|
269,454 | 177,233 | ||||||
Construction
|
91,652 | 109,635 | ||||||
Multi-family
|
31,212 | 26,855 | ||||||
Home
equity lines of credit
|
28,253 | 21,541 | ||||||
695,287 | 559,373 | |||||||
Other
loans:
|
||||||||
Commercial
non-real estate
|
15,355 | 11,859 | ||||||
Passbook
and stock secured
|
508 | 440 | ||||||
Personal
|
871 | 1,136 | ||||||
16,734 | 13,435 | |||||||
Total
loans
|
712,021 | 572,808 | ||||||
Less:
|
||||||||
Allowance
for loan losses
|
(6,912 | ) | (3,637 | ) | ||||
Net
deferred loan origination fees
|
(1,005 | ) | (1,067 | ) | ||||
Loans,
net
|
$ | 704,104 | $ | 568,104 |
Years
Ended December 31,
|
||||||||||||
(In
thousands)
|
2008
|
2007
|
2006
|
|||||||||
Balance
at beginning of year
|
$ | 3,637 | $ | 3,362 | $ | 2,937 | ||||||
Provision
for loan losses
|
5,638 | 465 | 434 | |||||||||
Recoveries
|
3 | 80 | 3 | |||||||||
Loans
charged-off
|
(2,366 | ) | (270 | ) | (12 | ) | ||||||
Balance
at end of year
|
$ | 6,912 | $ | 3,637 | $ | 3,362 | ||||||
December
31,
|
||||||||
(In
thousands)
|
2008
|
2007
|
||||||
Impaired
loans without a valuation allowance
|
$ | 10,538 | $ | 4,495 | ||||
Impaired
loans with a valuation allowance
|
1,929 | 621 | ||||||
Total
impaired loans
|
$ | 12,467 | $ | 5,116 | ||||
Valuation
allowance related to impaired loans
|
$ | 418 | $ | 89 | ||||
Total
non-accrual loans
|
$ | 14,232 | $ | 4,982 | ||||
Total
loans past-due ninety days or more and still accruing
|
$ | - | $ | - |
Years
Ended December 31,
|
||||||||||||
(In
thousands)
|
2008
|
2007
|
2006
|
|||||||||
Average
investment in impaired loans
|
$ | 8,058 | $ | 4,605 | $ | 701 | ||||||
Interest
income recognized on
|
||||||||||||
impaired
loans
|
$ | 299 | $ | 227 | $ | - | ||||||
Interest
income recognized on a cash basis
|
||||||||||||
on
impaired loans
|
$ | 299 | $ | 227 | $ | - |
Years
Ended December 31,
|
||||||||||||
(In
thousands)
|
2008
|
2007
|
2006
|
|||||||||
Net
loss on sales of real estate
|
$ | 5 | $ | - | $ | - | ||||||
Provision
for losses
|
475 | - | - | |||||||||
Operating
expenses
|
195 | 19 | 5 | |||||||||
Total
foreclosed real estate expense
|
$ | 675 | $ | 19 | $ | 5 | ||||||
Estimated
|
||||||||||||
December
31,
|
Useful
|
|||||||||||
(In
thousands)
|
2008
|
2007
|
Lives
|
|||||||||
Land
and land improvements
|
$ | 5,007 | $ | 5,007 |
-
|
|||||||
Buildings
|
17,699 | 18,435 |
40
years
|
|||||||||
Leasehold
improvements
|
866 | 411 |
5-15
years
|
|||||||||
Equipment
|
6,311 | 6,633 |
3-10
years
|
|||||||||
29,883 | 30,486 | |||||||||||
Less
accumulated depreciation
|
||||||||||||
and
amortization
|
(7,173 | ) | (7,670 | ) | ||||||||
$ | 22,710 | $ | 22,816 | |||||||||
Year
Ending
|
||||
December
31,
|
Amount
|
|||
(In
thousands)
|
||||
2009
|
$ | 115 | ||
2010
|
116 | |||
2011
|
116 | |||
2012
|
64 | |||
2013
|
19 | |||
$ | 430 | |||
December
31,
|
||||||||
(In
thousands)
|
2008
|
2007
|
||||||
Demand
deposits
|
$ | 55,216 | $ | 51,396 | ||||
NOW
deposits
|
36,835 | 33,649 | ||||||
Money
market deposits
|
172,876 | 138,688 | ||||||
Regular
and other deposits
|
117,913 | 118,837 | ||||||
Total
non-certificate accounts
|
382,840 | 342,570 | ||||||
Term
certificates less than $100,000
|
250,319 | 266,095 | ||||||
Term
certificates $100,000 and greater
|
163,693 | 165,781 | ||||||
Total
term certificates
|
414,012 | 431,876 | ||||||
Total
deposits
|
$ | 796,852 | $ | 774,446 |
(Dollars
in thousands)
|
December
31, 2008
|
December
31, 2007
|
||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Amount
|
Rate
|
Amount
|
Rate
|
|||||||||||||
Within
1 year
|
$ | 328,715 | 3.96 | % | $ | 261,209 | 4.82 | % | ||||||||
Over
1 year to 2 years
|
59,161 | 3.38 | 156,602 | 4.97 | ||||||||||||
Over
2 years to 3 years
|
18,652 | 3.39 | 9,114 | 4.26 | ||||||||||||
Over
3 years to 4 years
|
2,192 | 4.52 | 2,363 | 4.02 | ||||||||||||
Over
4 years to 5 years
|
5,292 | 3.91 | 2,588 | 4.46 | ||||||||||||
$ | 414,012 | 3.86 | % | $ | 431,876 | 4.86 | % |
(Dollars
in thousands)
|
December
31, 2008
|
December
31, 2007
|
||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Maturing
During the
|
Average
|
Average
|
||||||||||||||
Year
Ending December 31,
|
Amount
|
Rate
|
Amount
|
Rate
|
||||||||||||
2008
|
$ | - | - | % | $ | 14,848 | 4.80 | % | ||||||||
2009
|
7,475 | 4.00 | 7,475 | 4.00 | ||||||||||||
2010
|
5,200 | 4.22 | 5,050 | 4.22 | ||||||||||||
2011
|
15,000 | 2.99 | - | - | ||||||||||||
2012
|
15,000 | 3.29 | - | - | ||||||||||||
2013
|
15,000 | 3.54 | - | - | ||||||||||||
$ | 57,675 | 3.45 | % | $ | 27,373 | 4.48 | % | |||||||||
Years
Ended December 31,
|
||||||||||||
(In
thousands)
|
2008
|
2007
|
2006
|
|||||||||
Current
tax provision:
|
||||||||||||
Federal
|
$ | 1,081 | $ | 625 | $ | 1,314 | ||||||
State
|
112 | 71 | 203 | |||||||||
Total
current provision
|
1,193 | 696 | 1,517 | |||||||||
Deferred
tax benefit:
|
||||||||||||
Federal
|
(2,239 | ) | (281 | ) | (350 | ) | ||||||
State
|
(830 | ) | (35 | ) | (40 | ) | ||||||
(3,069 | ) | (316 | ) | (390 | ) | |||||||
Change
in enacted state tax rate
|
106 | - | - | |||||||||
Change
in valuation reserve
|
500 | - | - | |||||||||
Total
deferred benefit
|
(2,463 | ) | (316 | ) | (390 | ) | ||||||
Total
tax provision (benefit)
|
$ | (1,270 | ) | $ | 380 | $ | 1,127 |
Years
Ended December 31,
|
||||||||||||
(In
thousands)
|
2008
|
2007
|
2006
|
|||||||||
Statutory
federal tax rate
|
(34.0 | ) % | 34.0 | % | 34.0 | % | ||||||
Increase
(decrease) resulting from:
|
||||||||||||
State
taxes, net of federal tax benefit
|
(14.0 | ) | 0.9 | 2.4 | ||||||||
Dividends
received deduction
|
(5.8 | ) | (7.0 | ) | (5.0 | ) | ||||||
Bank-owned
life insurance
|
(3.0 | ) | (14.7 | ) | (6.2 | ) | ||||||
Change
in state tax rate
|
3.1 | - | - | |||||||||
Change
in valuation reserve
|
14.8 | - | - | |||||||||
Other,
net
|
1.3 | 1.2 | 0.3 | |||||||||
Effective
tax rates
|
(37.6 | ) % | 14.4 | % | 25.5 | % | ||||||
December
31,
|
||||||||
(In
thousands)
|
2008
|
2007
|
||||||
Deferred
tax assets:
|
||||||||
Federal
|
$ | 8,810 | $ | 3,146 | ||||
State
|
2,584 | 942 | ||||||
11,394 | 4,088 | |||||||
Valuation
reserve on assets
|
(500 | ) | - | |||||
Net
deferred tax asset
|
10,894 | 4,088 | ||||||
Deferred
tax liabilities:
|
||||||||
Federal
|
(649 | ) | (3,975 | ) | ||||
State
|
(188 | ) | (1,523 | ) | ||||
(837 | ) | (5,498 | ) | |||||
Net
deferred tax asset (liability)
|
$ | 10,057 | $ | (1,410 | ) | |||
December
31,
|
||||||||
(In
thousands)
|
2008
|
2007
|
||||||
Net
unrealized loss (gain) on securities available for sale
|
$ | 3,962 | $ | (4,875 | ) | |||
Depreciation
and amortization
|
(352 | ) | (360 | ) | ||||
Allowance
for loan losses
|
2,760 | 1,488 | ||||||
Employee
benefit plans
|
2,383 | 2,002 | ||||||
Charitable
contribution carryforward
|
1,198 | - | ||||||
Equity
loss on investment in affiliate bank
|
649 | 417 | ||||||
Other,
net
|
(43 | ) | (82 | ) | ||||
Valuation
reserve
|
(500 | ) | - | |||||
Net
deferred tax asset (liability)
|
$ | 10,057 | $ | (1,410 | ) | |||
Years
Ended December 31,
|
||||||||||||
(In
thousands)
|
2008
|
2007
|
2006
|
|||||||||
Balance
at beginning of year
|
$ | (1,410 | ) | $ | 362 | $ | 1,927 | |||||
Deferred
tax benefit from operations
|
3,069 | 316 | 390 | |||||||||
Change
in net unrealized gain (loss) on
|
||||||||||||
securities
available for sale
|
8,837 | (1,795 | ) | (2,362 | ) | |||||||
Adjustment
to initially apply
|
||||||||||||
SFAS
No. 158 for retirement plans
|
- | - | 407 | |||||||||
Adjustment
to initially apply
|
||||||||||||
SFAS
No. 158 for long-term care plan
|
187 | - | - | |||||||||
Termination
of supplemental
|
||||||||||||
executive
retirement plan
|
- | (228 | ) | - | ||||||||
Change
in enacted state tax rate
|
(106 | ) | - | - | ||||||||
Amortization
of net actuarial loss and
|
||||||||||||
prior
service cost
|
(20 | ) | (65 | ) | - | |||||||
Change
in valuation reserve
|
(500 | ) | - | - | ||||||||
Balance
at end of year
|
$ | 10,057 | $ | (1,410 | ) | $ | 362 |
December
31,
|
||||||||
(In
thousands)
|
2008
|
2007
|
||||||
Commitments
to originate loans
|
$ | 60,071 | $ | 37,674 | ||||
Unadvanced
funds on construction loans
|
56,254 | 35,293 | ||||||
Unadvanced
funds on home equity lines of credit
|
27,168 | 20,475 | ||||||
Unadvanced
funds on construction revolving lines of credit
|
25,787 | 23,800 | ||||||
Unadvanced
funds on commercial and revolving lines of credit
|
2,410 | 3,660 | ||||||
Commercial
letters of credit
|
1,248 | 1,574 |
Years
Ended December 31,
|
||||||||||||||||||||
2008
|
2007
|
2006
|
||||||||||||||||||
(In
thousands)
|
Directors
|
Officers
|
Directors
|
Officers
|
Directors
|
|||||||||||||||
Change
in plan assets:
|
||||||||||||||||||||
Fair
value of plan assets at beginning
|
||||||||||||||||||||
of
year
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Employer
contribution
|
- | - | - | 784 | - | |||||||||||||||
Benefits
payments
|
- | - | - | (784 | ) | - | ||||||||||||||
Fair
value of plan assets at end of year
|
- | - | - | - | - | |||||||||||||||
Change
in benefit obligation:
|
||||||||||||||||||||
Benefit
obligation at beginning of year
|
668 | 3,547 | 646 | 3,922 | 386 | |||||||||||||||
Service
cost
|
66 | 39 | 103 | 63 | 59 | |||||||||||||||
Interest
cost
|
38 | 155 | 37 | 226 | 22 | |||||||||||||||
Benefit
payments
|
- | - | (784 | ) | - | |||||||||||||||
Actuarial
loss (gain)
|
(10 | ) | 16 | (118 | ) | 120 | 179 | |||||||||||||
Plan
termination
|
- | (3,757 | ) | - | - | - | ||||||||||||||
Benefit
obligation at end of year
|
762 | - | 668 | 3,547 | 646 | |||||||||||||||
Funded
status
|
$ | (762 | ) | $ | - | $ | (668 | ) | $ | (3,547 | ) | $ | (646 | ) | ||||||
Accrued
benefit obligation
|
$ | (762 | ) | $ | - | $ | (668 | ) | $ | (3,547 | ) | $ | (646 | ) | ||||||
Accumulated
benefit obligation
|
$ | 657 | $ | - | $ | 567 | $ | 2,905 | $ | 517 |
Years
Ended December 31,
|
||||||||||||||||||||
(In
thousands)
|
2008
|
2007
|
2006
|
|||||||||||||||||
Directors
|
Officers
|
Directors
|
Officers
|
Directors
|
||||||||||||||||
Service
cost
|
$ | 66 | $ | 39 | $ | 103 | $ | 63 | $ | 59 | ||||||||||
Interest
cost
|
38 | 155 | 37 | 226 | 22 | |||||||||||||||
Recognized
net actuarial loss
|
- | 16 | 13 | 5 | - | |||||||||||||||
Recognition
of prior service cost
|
28 | - | 28 | - | 28 | |||||||||||||||
$ | 132 | $ | 210 | $ | 181 | $ | 294 | $ | 109 | |||||||||||
2008
|
2007
|
2006
|
||||||||||||||||||
Directors
|
Officers
|
Directors
|
Officers
|
Directors
|
||||||||||||||||
Discount
rate
|
5.75 | % | 5.75 | % | 5.75 | % | 5.75 | % | 5.75 | % | ||||||||||
Rate
of compensation increase
|
3.00 | % | 4.00 | % | 3.00 | % | 4.00 | % | 3.00 | % | ||||||||||
Expected
return on plan assets
|
N/A | N/A | N/A | N/A | N/A | |||||||||||||||
Retirement
age
|
72 | 65 | 72 | 65 | 72 |
Year
Ending December 31,
|
Amount
|
|||
(In
thousands)
|
||||
2009
|
$ 190
|
|||
2010
|
-
|
|||
2011
|
-
|
|||
2012
|
222
|
|||
2013
|
141
|
|||
2014-2018
|
316
|
Year
Ended December 31,
|
||||
(In
thousands)
|
2008
|
|||
Change
in plan assets:
|
||||
Fair
value of plan assets at beginning
|
||||
of
year
|
$ | - | ||
Employer
contribution
|
44 | |||
Benefits
payments
|
(44 | ) | ||
Fair
value of plan assets at end of year
|
- | |||
Change
in benefit obligation:
|
||||
Benefit
obligation at beginning of year
|
- | |||
Adjustment
to initially apply FAS 158
|
||||
for
long-term health care plan
|
(540 | ) | ||
Interest
cost
|
(42 | ) | ||
Benefit
payments
|
44 | |||
Actuarial
loss
|
(191 | ) | ||
Benefit
obligation at end of year
|
$ | (729 | ) |
Year
Ended December 31,
|
||||
(In
thousands)
|
2008
|
|||
Service
cost
|
$ | - | ||
Interest
cost
|
42 | |||
Recognized
net actuarial loss
|
- | |||
Recognition
of prior service cost
|
26 | |||
$ | 68 | |||
2008
|
||||
Discount
rate
|
6.50 | % | ||
Rate
of premium increases
|
4.00 | % | ||
Expected
return on plan assets
|
N/A |
Year
Ending December 31,
|
Amount
|
|||
(In
thousands)
|
||||
2009
|
$ 45
|
|||
2010
|
48
|
|||
2011
|
49
|
|||
2012
|
51
|
|||
2013
|
53
|
|||
2014-2018
|
381
|
Weighted
Average
Assumptions |
||||
2008
|
||||
Expected
term (years)
|
6.5 | |||
Expected
dividend yield
|
0.84 | % | ||
Expected
volatility
|
18.83 | % | ||
Expected
forfeiture rate
|
9.00 | % | ||
Risk-free
interest rate
|
3.48 | % | ||
Fair
value of options granted
|
$ | 2.37 |
|
|
Weighted-Average
|
||||||
2008
|
Shares
|
Exercise
Price
|
||||||
Options
outstanding at beginning of year
|
- | $ | - | |||||
Options
granted
|
622,000 | 9.50 | ||||||
Options
exercised
|
- | - | ||||||
Options
outstanding at end of year
|
622,000 | $ | 9.50 | |||||
Options
exercisable at end of year
|
- | $ | - | |||||
Weighted-average
remaining contractual life
|
9.8
years
|
Weighted-
|
||||||||
Average
|
||||||||
Number
|
Grant
|
|||||||
of
|
Date
|
|||||||
Shares
|
Fair Value
|
|||||||
Restricted
stock at beginning of year
|
- | $ | - | |||||
Granted
|
182,625 | 9.50 | ||||||
Vested
|
- | - | ||||||
Forfeited
|
- | - | ||||||
Restricted
stock at end of year
|
182,625 | $ | 9.50 |
Year
Ending December 31,
|
Amount
|
|||
(In
thousands)
|
||||
2009
|
227 | |||
2010
|
241 | |||
2011
|
257 | |||
2012
|
272 | |||
2013
|
291 | |||
Thereafter
|
6,750 | |||
$ | 8,038 |
December
31,
|
||||
(In
thousands)
|
2008
|
|||
Allocated
|
- | |||
Committed
to be allocated
|
41 | |||
Unallocated
|
787 | |||
828 |
Years
Ended December 31,
|
||||||||
(In
thousands)
|
2008
|
2007
|
||||||
Balance
at beginning of year
|
$ | 9,782 | $ | 9,748 | ||||
Additions
|
889 | 1,955 | ||||||
Reductions
|
(1,548 | ) | (1,921 | ) | ||||
Balance
at end of year
|
$ | 9,123 | $ | 9,782 | ||||
Minimum
|
||||||||||||||||||||||||
To
Be Well
|
||||||||||||||||||||||||
Minimum
|
Capitalized
Under
|
|||||||||||||||||||||||
Capital
|
Prompt
Corrective
|
|||||||||||||||||||||||
Actual
|
Requirement
|
Action
Provisions
|
||||||||||||||||||||||
(Dollars
in thousands)
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
||||||||||||||||||
December
31, 2008
|
||||||||||||||||||||||||
Total
Capital (to Risk Weighted
|
||||||||||||||||||||||||
Assets):
|
||||||||||||||||||||||||
Company
|
$ | 199,648 | 21.5 | % | $ | 74,383 | 8.0 | % | N/A | N/A | ||||||||||||||
Bank
|
138,568 | 15.3 | 72,651 | 8.0 | $ | 90,814 | 10.0 | |||||||||||||||||
Tier
1 Capital (to Risk Weighted
|
||||||||||||||||||||||||
Assets):
|
||||||||||||||||||||||||
Company
|
192,736 | 20.7 | 37,192 | 4.0 | N/A | N/A | ||||||||||||||||||
Bank
|
131,656 | 14.5 | 36,326 | 4.0 | 54,488 | 6.0 | ||||||||||||||||||
Tier
1 Capital (to Average Assets):
|
||||||||||||||||||||||||
Company
|
192,736 | 18.0 | 42,785 | 4.0 | N/A | N/A | ||||||||||||||||||
Bank
|
131,656 | 12.8 | 41,091 | 4.0 | 51,364 | 5.0 | ||||||||||||||||||
December
31, 2007
|
||||||||||||||||||||||||
Total
Capital (to Risk Weighted
|
||||||||||||||||||||||||
Assets):
|
||||||||||||||||||||||||
Company
|
$ | 117,546 | 14.4 | % | $ | 65,236 | 8.0 | % | N/A | N/A | ||||||||||||||
Bank
|
104,156 | 13.0 | 64,221 | 8.0 | $ | 80,276 | 10.0 | |||||||||||||||||
Tier
1 Capital (to Risk Weighted
|
||||||||||||||||||||||||
Assets):
|
||||||||||||||||||||||||
Company
|
109,154 | 13.4 | 32,618 | 4.0 | N/A | N/A | ||||||||||||||||||
Bank
|
95,764 | 11.9 | 32,110 | 4.0 | 48,165 | 6.0 | ||||||||||||||||||
Tier
1 Capital (to Average Assets):
|
||||||||||||||||||||||||
Company
|
109,154 | 11.5 | 38,013 | 4.0 | N/A | N/A | ||||||||||||||||||
Bank
|
95,764 | 10.2 | 37,505 | 4.0 | 46,881 | 5.0 |
December
31, 2008
|
December
31, 2007
|
|||||||||||||||
(In
thousands)
|
Consolidated
|
Bank
|
Consolidated
|
Bank
|
||||||||||||
Total
stockholders' equity per financial statements
|
$ | 189,840 | $ | 129,162 | $ | 115,684 | $ | 102,294 | ||||||||
Adjustments
to Tier 1 capital:
|
||||||||||||||||
Accumulated
other comprehensive (income) loss
|
6,205 | 5,664 | (6,507 | ) | (6,507 | ) | ||||||||||
Net
unrealized loss on
|
||||||||||||||||
marketable
equity securities
|
(3,288 | ) | (3,149 | ) | - | - | ||||||||||
Servicing
assets disallowed
|
(21 | ) | (21 | ) | (23 | ) | (23 | ) | ||||||||
Total
Tier 1 capital
|
192,736 | 131,656 | 109,154 | 95,764 | ||||||||||||
Adjustments
to total capital:
|
||||||||||||||||
Allowance
for loan losses
|
6,912 | 6,912 | 3,637 | 3,637 | ||||||||||||
45%
of net unrealized gains on
|
||||||||||||||||
marketable
equity securities
|
- | - | 4,755 | 4,755 | ||||||||||||
Total
regulatory capital
|
$ | 199,648 | $ | 138,568 | $ | 117,546 | $ | 104,156 |
December
31, 2008
|
||||||||||||||||
(In
thousands)
|
Level
1
|
Level
2
|
Level
3
|
Total
Fair Value
|
||||||||||||
Securities
available for sale
|
$ | 47,799 | $ | 204,730 | $ | - | $ | 252,529 |
December
31, 2008
|
||||||||||||||||
Total
|
||||||||||||||||
(In
thousands)
|
Level
1
|
Level
2
|
Level
3
|
Losses
|
||||||||||||
Impaired
Loans
|
$ | - | $ | - | $ | 1,511 | $ | (418 | ) |
December
31,
|
||||||||||||||||
2008
|
2007
|
|||||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
(In
thousands)
|
Amount
|
Value
|
Amount
|
Value
|
||||||||||||
Financial
assets:
|
||||||||||||||||
Cash
and cash equivalents
|
$ | 20,265 | $ | 20,265 | $ | 103,093 | $ | 103,093 | ||||||||
Certificates
of deposit
|
7,000 | 7,010 | - | - | ||||||||||||
Securities
available for sale
|
252,529 | 252,529 | 267,058 | 267,058 | ||||||||||||
Federal
Home Loan Bank stock
|
4,303 | 4,303 | 3,165 | 3,165 | ||||||||||||
Loans
|
704,104 | 705,956 | 568,104 | 572,820 | ||||||||||||
Accrued
interest receivable
|
6,036 | 6,036 | 5,764 | 5,764 | ||||||||||||
Financial
liabilities:
|
||||||||||||||||
Deposits
|
796,852 | 799,378 | 774,446 | 776,037 | ||||||||||||
Stock
subscriptions
|
- | - | 62,518 | 62,518 | ||||||||||||
Borrowings
|
65,486 | 66,509 | 36,527 | 36,556 | ||||||||||||
Accrued
interest payable
|
1,081 | 1,081 | 1,222 | 1,222 |
December
31,
|
||||||||
(In
thousands)
|
2008
|
2007
|
||||||
BALANCE SHEET
|
||||||||
Assets
|
||||||||
Cash
and cash equivalents - subsidiary
|
$ | 10,523 | $ | - | ||||
Cash
and cash equivalents - other
|
2,525 | 177 | ||||||
Certificates
of deposit - affiliate bank
|
7,000 | - | ||||||
Securities
available for sale, at fair value
|
16,338 | 1,093 | ||||||
Investment
in subsidiaries
|
135,299 | 102,294 | ||||||
Investment
in affiliate bank
|
10,376 | 10,772 | ||||||
Bank-owned
life insurance
|
4,144 | - | ||||||
Due
from bank subsidiary
|
2,262 | - | ||||||
Other
assets
|
1,737 | 1,577 | ||||||
Total
assets
|
$ | 190,204 | $ | 115,913 | ||||
Liabilities and Stockholders'
Equity
|
||||||||
Accrued
expenses and other liabilities
|
$ | 364 | $ | 229 | ||||
Stockholders'
equity
|
189,840 | 115,684 | ||||||
Total
liabilities and stockholders' equity
|
$ | 190,204 | $ | 115,913 |
Years
Ended December 31,
|
||||||||||||
(In
thousands)
|
2008
|
2007
|
2006
|
|||||||||
STATEMENTS OF OPERATIONS
|
||||||||||||
Income:
|
||||||||||||
Interest
and dividend income
|
$ | 812 | $ | 113 | $ | 180 | ||||||
Equity
loss on investment in affliate bank
|
(396 | ) | (541 | ) | (578 | ) | ||||||
Bank-owned
life insurance income
|
144 | - | - | |||||||||
Total
income (loss)
|
560 | (428 | ) | (398 | ) | |||||||
Contribution
to Meridian Charitable Foundation
|
3,000 | - | - | |||||||||
Operating
expenses
|
1,354 | 412 | 58 | |||||||||
Loss
before income taxes and equity in undistributed
|
||||||||||||
earnings
of subsidiaries
|
(3,794 | ) | (840 | ) | (456 | ) | ||||||
Applicable
income tax benefit
|
(1,339 | ) | (184 | ) | (113 | ) | ||||||
(2,455 | ) | (656 | ) | (343 | ) | |||||||
Equity
in undistributed earnings of subsidiaries
|
347 | 2,922 | 3,637 | |||||||||
Net
income (loss)
|
$ | (2,108 | ) | $ | 2,266 | $ | 3,294 | |||||
Years
Ended December 31,
|
||||||||||||
(In
thousands)
|
2008
|
2007
|
2006
|
|||||||||
STATEMENTS OF CASH FLOWS
|
||||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income (loss)
|
$ | (2,108 | ) | $ | 2,266 | $ | 3,294 | |||||
Adjustments
to reconcile net income (loss) to net
|
||||||||||||
cash
provided (used) by operating activities:
|
||||||||||||
Equity
in undistributed earnings of subsidiaries
|
(347 | ) | (2,922 | ) | (3,637 | ) | ||||||
Contribution
of stock to charitable foundation
|
3,000 | - | - | |||||||||
Equity
loss on investment in affliate bank
|
396 | 541 | 578 | |||||||||
Net
accretion of securities available for sale
|
- | - | (125 | ) | ||||||||
Income
from bank-owned life insurance
|
(144 | ) | - | - | ||||||||
Share-based
compensation expense
|
45 | - | - | |||||||||
Increase
in other assets
|
(112 | ) | (1,374 | ) | (203 | ) | ||||||
Increase
in other liabilities
|
135 | 229 | - | |||||||||
Net
cash provided (used) by operating activities
|
865 | (1,260 | ) | (93 | ) | |||||||
Cash
flows from investing activities:
|
||||||||||||
Purchases
of certificates of deposit
|
(7,000 | ) | - | - | ||||||||
Proceeds
from redemption of mutual funds
|
5,250 | - | - | |||||||||
Sales
and maturies of securities available for sale
|
- | 1,523 | 23,050 | |||||||||
Purchase
of securities available for sale
|
(20,634 | ) | (112 | ) | (25,431 | ) | ||||||
Investment
in affiliate bank
|
- | - | (12,000 | ) | ||||||||
Investment
in subsidiary
|
(8,280 | ) | - | - | ||||||||
Dividend
from subsidiary
|
- | - | 14,500 | |||||||||
Loan
to subsidiary
|
(2,262 | ) | - | - | ||||||||
Purchase
of bank-owned life insurance
|
(4,000 | ) | - | - | ||||||||
Net
cash provided (used) by investing activities
|
(36,926 | ) | 1,411 | 119 | ||||||||
Cash
flows from financing activities:
|
||||||||||||
Stock
offering
|
97,633 | - | - | |||||||||
Offering
proceeds to bank subsidiary
|
(48,701 | ) | - | - | ||||||||
Net
cash provided by financing activities
|
48,932 | - | - | |||||||||
Net
increase in cash and cash equivalents
|
12,871 | 151 | 26 | |||||||||
Cash
and cash equivalents at beginning of year
|
177 | 26 | - | |||||||||
Cash
and cash equivalents at end of year
|
$ | 13,048 | $ | 177 | $ | 26 |
Years
Ended December 31,
|
||||||||||||||||||||||||||||||||
|
2008
|
2007
|
||||||||||||||||||||||||||||||
Fourth
|
Third
|
Second
|
First
|
Fourth
|
Third
|
Second
|
First
|
|||||||||||||||||||||||||
(In
thousands)
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
||||||||||||||||||||||||
Interest
and dividend income
|
$ | 13,521 | $ | 13,344 | $ | 12,909 | $ | 13,123 | $ | 12,810 | $ | 12,390 | $ | 12,080 | $ | 11,895 | ||||||||||||||||
Interest
expense
|
6,184 | 6,579 | 6,996 | 7,285 | 7,501 | 7,203 | 6,800 | 6,592 | ||||||||||||||||||||||||
Net
interest income
|
7,337 | 6,765 | 5,913 | 5,838 | 5,309 | 5,187 | 5,280 | 5,303 | ||||||||||||||||||||||||
Provision
for loan losses (1)
|
2,907 | 403 | 2,197 | 131 | 205 | 117 | 71 | 72 | ||||||||||||||||||||||||
Net
interest income, after provision for loan
losses
|
4,430 | 6,362 | 3,716 | 5,707 | 5,104 | 5,070 | 5,209 | 5,231 | ||||||||||||||||||||||||
Non-interest
income (2)
|
339 | 3,808 | 1,050 | 3,176 | 452 | 11 | 1,253 | 2,936 | ||||||||||||||||||||||||
Non-interest
expenses (3)
|
7,379 | 6,799 | 8,476 | 9,312 | 6,140 | 5,707 | 5,237 | 5,536 | ||||||||||||||||||||||||
Income
(loss) before
|
||||||||||||||||||||||||||||||||
income
taxes
|
(2,610 | ) | 3,371 | (3,710 | ) | (429 | ) | (584 | ) | (626 | ) | 1,225 | 2,631 | |||||||||||||||||||
Provision
(benefit) for
|
||||||||||||||||||||||||||||||||
income
taxes
|
(896 | ) | 1,228 | (1,494 | ) | (108 | ) | (562 | ) | (323 | ) | 429 | 836 | |||||||||||||||||||
Net
income (loss)
|
$ | (1,714 | ) | $ | 2,143 | $ | (2,216 | ) | $ | (321 | ) | $ | (22 | ) | $ | (303 | ) | $ | 796 | $ | 1,795 |
(1)
Increases in the provision for loan losses in 2008 are due to an increase
in impaired loans with specific reserves and management's assessment
of
|
various
factors affecting the portfolio, including further deterioration of the
economic environment.
|
(2) Non-interest
income fluctuates each quarter primarily due to securities
gains.
|
(3)
Non-interest expenses for the first quarter of 2008 include a $3,000,000
contribution to the Company's charitable
foundation.
|
|
(A)
|
Report
of Independent Registered Public Accounting
Firm
|
|
(B)
|
Consolidated
Balance Sheets - at December 31, 2008 and
2007
|
|
(C)
|
Consolidated
Statements of Operations - Years ended December 31, 2008, 2007 and
2006
|
|
(D)
|
Consolidated
Statements of Changes in Stockholders’ Equity - Years ended December 31,
2008, 2007 and 2006
|
|
(E)
|
Consolidated
Statements of Cash Flows - Years ended December 31, 2008, 2007 and
2006
|
|
(F)
|
Notes
to Consolidated Financial
Statements.
|
3.1
|
Amended
and Restated Articles of Organization of Meridian Interstate Bancorp,
Inc.*
|
3.2
|
Amended
and Restated Bylaws of Meridian Interstate Bancorp,
Inc.*
|
4
|
Form
of Common Stock Certificate of Meridian Interstate Bancorp,
Inc.*
|
10.1
|
Form
of East Boston Savings Bank Employee Stock Ownership
Plan*
|
10.2
|
Form
of East Boston Savings Bank Employee Stock Ownership Plan Trust
Agreement*
|
10.3
|
East
Boston Savings Bank Employee Stock Ownership Plan Loan Agreement, Pledge
Agreement and Promissory Note*
|
10.4
|
Form
of Amended and Restated Employment
Agreement*
|
10.5
|
Form
of East Boston Savings Bank Employee Severance Compensation
Plan*
|
10.6
|
Form
of Supplemental Executive Retirement Agreements with certain
directors*
|
10.7
|
Form of Separation Agreement with
Robert F. Verdonck incorporated by reference to the Form 8-K filed on
September 11, 2008.
|
10.8
|
Form of Amended and Restated
Supplemental Executive Retirement Agreement with Leonard V. Siuda filed as
an exhibit to Form 10-Q filed on May 14,
2008.
|
10.9
|
Form of Amended and Restated
Supplemental Executive Retirement Agreement with Philip F. Freehan filed
as an exhibit to Form 10-Q filed on May 14,
2008.
|
10.10
|
Form
of Supplemental Executive Retirement Agreement with Richard J. Gavegnano
filed as an exhibit to Form 10-Q filed on May 14,
2008.
|
10.11 | Form of Employment Agreement with Richard J. Gavegnano incorporated by reference to the Form 8-K filed on January 12, 2009. |
10.12 | Form of Employment Agreement with Deborah J. Jackson incorporated by reference to the Form 8-K filed on January 22, 2009. |
10.13 | Form of Supplemental Executive Retirement Agreement with Deborah J. Jackson incorporated by reference to the Form 8-K filed on January 22, 2009. |
10.14
|
2008
Equity Incentive Plan**
|
21
|
Subsidiaries
of Registrant*
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of
2002
|
_______________________________
|
*
|
Incorporated
by reference to the Registration Statement on Form S-1 of Meridian
Interstate Bancorp, Inc. (File No. 333-146373), originally filed with the
Securities and Exchange Commission on September 28,
2007.
|
**
|
Incorporated
by reference to Appendix A to the Company’s Definitive
Proxy Statement for its 2008 Annual Meeting, as filed with the Securities
and Exchange Commission on July 11,
2008.
|
MERIDIAN
INTERSTATE BANCORP, INC.
|
|||||
Date:
|
March
16, 2009
|
By:
|
/s/
Richard J. Gavegnano
|
||
Richard
J. Gavegnano
|
|||||
Chairman
of the Board and Chief Executive Officer
|
|||||
(Duly
Authorized Representative)
|
|||||
Signatures
|
Title
|
Date
|
||
/s/
Richard J. Gavegnano
|
Chairman
of the Board and Chief
|
March
16, 2009
|
||
Richard
J. Gavegnano
|
Executive
Officer (Principal Executive Officer)
|
|||
/s/
Leonard V. Siuda
|
Chief
Financial Officer and Treasurer
|
March
16, 2009
|
||
Leonard
V. Siuda
|
(Principal
Financial and Accounting Officer)
|
|||
/s/
Vincent D. Basile
|
Director
|
March
16, 2009
|
||
Vincent
D. Basile
|
||||
/s/
Anna R. DiMaria
|
Director
|
March
16, 2009
|
||
Anna
R. DiMaria
|
||||
/s/
Philip F. Freehan
|
Director
|
March
16, 2009
|
||
Philip
F. Freehan
|
||||
/s/
Domenic A. Gambardella
|
Director
|
March
16, 2009
|
||
Domenic
A. Gambardella
|
||||
/s/
Edward L. Lynch
|
Director
|
March
16, 2009
|
||
Edward
L. Lynch
|
||||
/s/
Gregory F. Natalucci
|
Director
|
March
16, 2009
|
||
Gregory
F. Natalucci
|
Signatures
|
Title
|
Date
|
||
/s/
James G. Sartori
|
Director
|
March
16, 2009
|
||
James
G. Sartori
|
||||
/s/
Paul T. Sullivan
|
Director
|
March
16, 2009
|
||
Paul
T. Sullivan
|
||||
/s/
Marilyn A. Censullo
|
Director
|
March
16, 2009
|
||
Marilyn
A. Censullo
|
||||
/s/
Richard D. Fernandez
|
Director
|
March
16, 2009
|
||
Richard
D. Fernandez
|
||||
/s/
Carl A. LaGreca
|
Director
|
March
16, 2009
|
||
Carl
A. LaGreca
|